National Fuel Reports Second Quarter Earnings

5/6, 10:45 PM (Source: GlobeNewswire)

WILLIAMSVILLE, N.Y., May 06, 2021 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2021 fiscal year and for the six months ended March 31, 2021.

FISCAL 2021 SECOND QUARTER SUMMARY

  • GAAP net income of $112.4 million, or $1.23 per share, compared to GAAP net loss of $106.1 million, or $1.23 per share, in the prior year.
  • Adjusted operating results of $123.2 million, or $1.34 per share, compared to $84.2 million, or $0.97 per share, in the prior year (see non-GAAP reconciliation on page 2).
  • Adjusted EBITDA of $298.4 million, an increase of 29%, compared to $231.1 million in the prior year (see non-GAAP reconciliation on page 23).
  • Pipeline & Storage segment Adjusted EBITDA of $58.6 million, an increase of 19% from the prior year.
  • Gathering segment Adjusted EBITDA of $41.4 million, an increase of 40% from the prior year.
  • E&P segment Adjusted EBITDA of $127.1 million, an increase of 59% from the prior year.
  • E&P segment net production of 85.2 Bcfe, an increase of 25.5 Bcfe, or 43%, 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 $1.09 per Mcfe, a 14% decrease from the prior year.
  • Average realized natural gas prices of $2.28 per Mcf, an increase $0.16 per Mcf from the prior year.
  • Average realized oil prices of $57.11 per Bbl, a decrease of $1.12 per Bbl from the prior year.
  • Utility segment announced greenhouse gas emissions reduction targets for its delivery system of 75% by 2030, and 90% by 2050, from 1990 levels.
  • Company is increasing its fiscal 2021 earnings guidance to a range of $3.85 to $4.05 per share, an increase of $0.15 at the midpoint, excluding items impacting comparability (see Guidance Summary on page 7).

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel had an excellent second quarter, with significant earnings growth resulting from the ongoing expansion of our interstate pipeline systems and the continued positive impact of our Appalachian upstream and gathering acquisition completed last summer. In light of these strong operating results, we are increasing our earnings guidance for fiscal 2021 to $3.85 to $4.05 per share, representing a 35% increase from the prior year at the midpoint of the updated range.  

“During the quarter, our Pipeline and Storage business commenced construction of our FM100 expansion and modernization project, which remains on track for a late calendar 2021 in-service date. In addition to contributing $50 million in annual revenues to our FERC-regulated pipeline operations, this project, along with the companion Transco Leidy South expansion, is expected to provide additional access to premium markets in the Mid-Atlantic for Seneca’s growing production base. Additionally, we continued to make significant strides on our sustainability-focused initiatives, with our Utility business announcing substantial greenhouse gas emissions reduction goals in March, driven by ongoing investments in the modernization of our natural gas distribution network. Evidencing our commitment to the continued reduction of National Fuel’s carbon footprint, we are working towards emissions reduction targets for the Company's midstream and upstream segments, maintaining our focus on climate-risk and the energy transition, as well as National Fuel’s long-term role in the energy complex.”

 
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS
         
  Three Months Ended  Six Months Ended
   March 31,  March 31,
(in thousands except per share amounts) 2021 2020 2021 2020
Reported GAAP Earnings $112,436  $(106,068) $190,210  $(19,477)
Items impacting comparability:                
Impairment of oil and gas properties (E&P)   177,761  76,152  177,761 
Tax impact of impairment of oil and gas properties   (48,503) (20,980) (48,503)
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)  
Deferred tax valuation allowance   56,770    56,770 
Unrealized (gain) loss on other investments (Corporate / All Other) (848) 5,414  450  6,433 
Tax impact of unrealized (gain) loss on other investments 178  (1,137) (94) (1,351)
Adjusted Operating Results $123,160  $84,237  $220,135  $171,633 
         
Reported GAAP Earnings Per Share $1.23  $(1.23) $2.08  $(0.23)
Items impacting comparability:        
Impairment of oil and gas properties, net of tax (E&P)   1.49  0.60  1.49 
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   
Deferred tax valuation allowance   0.66    0.66 
Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) (0.01) 0.05    0.06 
Adjusted Operating Results Per Share $1.34  $0.97  $2.40  $1.98 
                 

FISCAL 2021 GUIDANCE UPDATE

National Fuel is revising its fiscal 2021 earnings guidance to reflect the results of the second fiscal quarter, along with updated commodity price and operating unit cost assumptions for the balance of the year. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $3.85 to $4.05 per share, an increase of $0.15 per share from the midpoint of the Company’s prior guidance range.

The Company is now assuming that WTI oil prices will average $60.00 per Bbl for the remainder of the year, a $7.50 increase from the $52.50 per Bbl assumed in the previous guidance. For guidance purposes, the Company’s projections approximate the current NYMEX forward markets and consider the impact of local sales point differentials and new physical firm sales, transportation, and financial hedge contracts.

Seneca currently has firm sales contracts in place for 142 Bcf, or approximately 95% of its projected remaining fiscal 2021 Appalachian production, limiting its exposure to in-basin markets. Approximately 132 Bcf of those sales, or 88% of Seneca’s expected remaining Appalachian production, are either matched by a financial hedge, including a combination of swaps and no-cost collars, or were entered into at a fixed price. Additionally, Seneca has financial hedges in place for 786 Mbbl, or approximately 72%, of its expected remaining oil production for the fiscal year.

The Company’s other guidance assumptions remain largely unchanged from the previous guidance. Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2021 are outlined in the table on page 7.

DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended March 31, 2021 is summarized in a tabular form on pages 8 and 9 of this report (earnings drivers for the six months ended March 31, 2021 are summarized on pages 10 and 11). 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)2021 2020 Variance
GAAP Earnings$36,822  $(175,275) $212,097 
Premium paid on early redemption of debt, net of tax10,710    10,710 
Impairment of oil and gas properties, net of tax  129,258  (129,258)
Deferred tax valuation allowance  60,463  (60,463)
Adjusted Operating Results$47,532  $14,446  $33,086 
            
Adjusted EBITDA$127,146  $79,846  $47,300 

Seneca’s second quarter GAAP earnings increased $212.1 million versus the prior year. This was primarily attributable to the non-recurrence of two items from the prior year's second quarter, including a non-cash ceiling test impairment charge of $129.3 million (after-tax) as well as a $60.5 million state income tax valuation allowance. Excluding these items noted above, as well as a loss of $14.8 million ($10.7 million after-tax) recognized on the early redemption of long-term debt for Seneca's share of a premium paid by the Company to redeem $500 million of the Company's 4.9% notes that were scheduled to mature in December 2021, Seneca’s second quarter earnings increased $33.1 million.

Seneca produced 85.2 Bcfe during the second quarter, an increase of 25.5 Bcfe, or 43%, from the prior year. The increase was primarily driven by higher natural gas production from the Company's fourth quarter fiscal 2020 acquisition of Appalachian upstream assets, as well as production growth from Seneca's other core development areas. Net production increased 21.2 Bcf to 50.2 Bcf in the Eastern Development Area ("EDA"), primarily due to higher production from the acquisition. Net production increased 4.6 Bcf to 31.3 Bcf in Seneca’s Western Development Area ("WDA"), primarily due to the ongoing development program in the region. Oil production for the second quarter decreased 44,000 Bbls, or 7%, from the prior year primarily due to natural production declines in Seneca's Midway Sunset, Lost Hills and Pioneer development areas as a result of lower activity in response to decreased crude oil prices. These declines were partially offset by new production brought on-line in Seneca’s Coalinga and 17N development areas.

Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.28 per Mcf, an increase of $0.16 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 $57.11 per Bbl, a decrease of $1.12 per Bbl compared to the prior year.

Lease operating and transportation (“LOE”) expense increased $15.3 million primarily due to higher transportation costs in Appalachia from increased production. LOE expense includes $49.6 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 $1.0 million due largely to higher natural gas production, partially offset by the impact of ceiling test impairments recorded during fiscal 2020.

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 $0.18 per Mcfe, or 14%, during the quarter.

Excluding the premium paid on the early redemption of long-term debt noted above, interest expense increased by $1.3 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Company's Appalachian acquisition. The increase in Seneca's effective income tax rate was largely driven by an increase to a valuation allowance for deferred tax assets that was initially established in the second quarter of fiscal 2020.

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)2021 2020 Variance
GAAP Earnings$24,928  $22,087  $2,841 
      
Adjusted EBITDA$58,570  $49,102  $9,468 

The Pipeline and Storage segment’s second quarter GAAP earnings increased $2.8 million versus the prior year primarily due to higher operating revenues and lower O&M expense, partially offset by higher DD&A expense and higher interest expense. The increase in operating revenues of $7.5 million, or 9%, 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, coupled with an increase in Supply Corporation's transportation and storage rates effective February 1, 2020, in accordance with Supply Corporation's 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. O&M expense decreased $2.3 million primarily due to a decrease in the reserve for preliminary project costs, which was partially offset by an increase in operating costs, largely the aforementioned Empire power costs. The increase in DD&A expense of $2.4 million was primarily attributable to incremental depreciation from the Empire North expansion project combined with an increase in Supply Corporation's depreciation rates associated with its rate case settlement. The increase in interest expense of $3.4 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
 March 31,
(in thousands)2021 2020 Variance
GAAP Earnings$20,700  $19,898  $802 
Premium paid on early redemption of debt, net of tax684    684 
Deferred tax valuation allowance  (3,769) 3,769 
Adjusted Operating Results$21,384  $16,129  $5,255 
      
Adjusted EBITDA$41,424  $29,541  $11,883 

The Gathering segment’s second quarter GAAP earnings increased $0.8 million versus the prior year. Excluding a $3.8 million income tax benefit that was recorded as an offset to the valuation allowance recognized by the Exploration and Production segment during the prior year second quarter that did not recur in the current quarter, as well as a $0.7 million after-tax loss recognized on the early redemption of long-term debt for Midstream Company's share of a premium paid by the Company to redeem $500 million of the Company's 4.9% notes that were scheduled to mature in December 2021, the Gathering segment's earnings increased $5.3 million.

The Gathering segment's earnings increase was primarily driven by higher operating revenues, which was partially offset by higher DD&A expense, higher O&M expenses and higher interest expense. Operating revenues increased $15.0 million, or 43%, 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 $2.8 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 and personnel costs, all associated with the Appalachian acquisition, were primarily responsible for the $3.1 million increase in O&M expense. Excluding the premium paid on the early redemption of long-term debt noted above, interest expense increased by $2.1 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Appalachian acquisition.

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
 March 31,
(in thousands)2021 2020 Variance
GAAP Earnings$32,044  $31,499  $545 
      
Adjusted EBITDA$73,885  $73,192  $693 

The Utility segment’s second quarter GAAP earnings increased $0.5 million versus the prior year primarily due to higher customer margins (operating revenues less purchased gas sold), partially offset by higher O&M expense. The increase in customer margin was due primarily to higher revenues earned through the Company's system modernization tracking mechanism in its New York service territory and colder weather in Distribution's Pennsylvania service territory that resulted in an increase in customer usage. These positive items were partially offset by the impact of adjustments recorded in the prior year for certain regulatory revenue and cost recovery mechanisms that did not occur in the current year. Weather in Distribution's Pennsylvania service territory was 8% colder on average than last year. The impact of weather variations on earnings in Distribution's New York service territory is largely mitigated by that jurisdiction's weather normalization clause. The $1.8 million increase in O&M expense was primarily attributable to incremental expense recorded to increase the allowance for uncollectible accounts due to the potential for higher customer non-payment resulting from the current economic backdrop brought on by COVID-19, as well as higher personnel costs.

Corporate and All Other

The Company’s operations that are included in Corporate and All Other generated a combined net loss of $2.1 million in the current year second quarter, which was $2.2 million lower than the combined loss of $4.3 million in the prior-year second quarter. The reduction in net loss was primarily driven by unrealized gains on investment securities recognized in the current quarter compared to unrealized losses on investment securities in the prior year second quarter.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 7, 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/2524688. 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 “2524688”. Both the webcast and conference call replay will be available until the close of business on Friday, May 14, 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. Webster716-857-7067
Media Contact:Karen L. Merkel716-857-7654

 

Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: the length and severity of the recent 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; 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; the Company's ability to estimate accurately the time and resources necessary to meet emissions targets; disallowance by applicable regulatory bodies of appropriate rate recovery for system modernization; moves to reduce or eliminate reliance on natural gas; 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; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in 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. 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, 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 six 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 Previous FY 2021 Guidance
Consolidated Earnings per Share, excluding items   
 impacting comparability$3.85 to $4.05 $3.65 to $3.95
Consolidated Effective Tax Rate~ 26% ~ 26%
    
Capital Expenditures (Millions)   
Exploration and Production$350 - $390 $350 - $390
Pipeline and Storage$250 - $300 $250 - $300
Gathering$30 - $40 $30 - $40
Utility$90 - $100 $90 - $100
Consolidated Capital Expenditures$720 - $830 $720 - $830
    
Exploration & Production Segment Guidance*   
    
Commodity Price Assumptions   
NYMEX natural gas price$2.75 /MMBtu $2.75 /MMBtu
Appalachian basin spot price$1.90 /MMBtu $2.05 /MMBtu
NYMEX (WTI) crude oil price$60.00 /Bbl $52.50 /Bbl
California oil price premium (% of WTI)96% 96%
    
Production (Bcfe)   
East Division - Appalachia300 to 315 295 to 320
West Division - California~ 15 ~ 15
Total Production315 to 330 310 to 335
    
E&P Operating Costs ($/Mcfe)   
LOE$0.82 - $0.84 $0.83 - $0.85
G&A$0.20 - $0.22 $0.20 - $0.22
DD&A$0.57 - $0.60 $0.58 - $0.62
    
Other Business Segment Guidance (Millions)   
Gathering Segment Revenues$185 - $200 $185 - $200
Pipeline and Storage Segment Revenues$335 - $345 $330 - $340
    
* 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, 2021
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2020 GAAP earnings$(175,275) $22,087  $19,898  $31,499  $(4,277) $(106,068)
            
Items impacting comparability:           
Impairment of oil and gas properties177,761          177,761 
Tax impact of impairment of oil and gas properties(48,503)         (48,503)
Deferred tax valuation allowance60,463    (3,769)   76  56,770 
Unrealized (gain) loss on other investments        5,414  5,414 
Tax impact of unrealized (gain) loss on other investments        (1,137) (1,137)
Second quarter 2020 adjusted operating results14,446  22,087  16,129  31,499  76  84,237 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production43,199          43,199 
Higher (lower) crude oil production(2,058)         (2,058)
Higher (lower) realized natural gas prices, after hedging10,040          10,040 
Higher (lower) realized crude oil prices, after hedging(498)         (498)
            
Midstream and All Other Revenues           
Higher (lower) operating revenues  5,893  11,846    (670) 17,069 
            
Downstream Margins***           
Impact of usage and weather      1,484    1,484 
System modernization tracker revenues      1,562    1,562 
Regulatory revenue adjustments      (1,226)   (1,226)
Higher (lower) energy marketing margins        (2,328) (2,328)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(12,070)         (12,070)
Lower (higher) operating expenses(711) 1,814  (2,473) (1,357) 1,352  (1,375)
Lower (higher) property, franchise and other taxes(907)         (907)
Lower (higher) depreciation / depletion(792) (1,875) (2,225)     (4,892)
            
Other Income (Expense)           
(Higher) lower other deductions  (377)     359  (18)
(Higher) lower interest expense(1,017) (2,686) (1,629)   (720) (6,052)
            
Income Taxes           
Lower (higher) income tax expense / effective tax rate(2,447) 157  (217) 191  (1,074) (3,390)
            
All other / rounding347  (85) (47) (109) 277  383 
Second quarter 2021 adjusted operating results47,532  24,928  21,384  32,044  (2,728) 123,160 
            
Items impacting comparability:           
Premium paid on early redemption of debt(14,772)   (943)     (15,715)
Tax impact of premium paid on early redemption of debt4,062    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 GAAP earnings$36,822  $24,928  $20,700  $32,044  $(2,058) $112,436 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of 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, 2021
(Unaudited)
            
 Upstream Midstream Downstream     
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
            
Second quarter 2020 GAAP earnings per share$(2.03) $0.26  $0.23  $0.36  $(0.05) $(1.23)
Items impacting comparability:           
Impairment of oil and gas properties, net of tax1.49          1.49 
Deferred tax valuation allowance0.70    (0.04)     0.66 
Unrealized (gain) loss on other investments, net of tax        0.05  0.05 
Earnings per share impact of diluted shares0.01  (0.01)        
Second quarter 2020 adjusted operating results per share0.17  0.25  0.19  0.36    0.97 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production0.47          0.47 
Higher (lower) crude oil production(0.02)         (0.02)
Higher (lower) realized natural gas prices, after hedging0.11          0.11 
Higher (lower) realized crude oil prices, after hedging(0.01)         (0.01)
            
Midstream and All Other Revenues           
Higher (lower) operating revenues  0.06  0.13    (0.01) 0.18 
            
Downstream Margins***           
Impact of usage and weather      0.02    0.02 
System modernization tracker revenues      0.02    0.02 
Regulatory revenue adjustments      (0.01)   (0.01)
Higher (lower) energy marketing margins        (0.03) (0.03)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(0.13)         (0.13)
Lower (higher) operating expenses(0.01) 0.02  (0.03) (0.01) 0.01  (0.02)
Lower (higher) property, franchise and other taxes(0.01)         (0.01)
Lower (higher) depreciation / depletion(0.01) (0.02) (0.02)     (0.05)
            
Other Income (Expense)           
(Higher) lower other deductions           
(Higher) lower interest expense(0.01) (0.03) (0.02)   (0.01) (0.07)
            
Income Taxes           
Lower (higher) income tax expense / effective tax rate(0.03)       (0.01) (0.04)
            
Impact of additional shares(0.01) (0.01) (0.01) (0.02)   (0.05)
All other / rounding0.01    (0.01) (0.01) 0.02  0.01 
Second quarter 2021 adjusted operating results per share0.52  0.27  0.23  0.35  (0.03) 1.34 
            
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 GAAP earnings per share$0.40  $0.27  $0.23  $0.35  $(0.02) $1.23 
            
* Amounts do not reflect intercompany eliminations.           
** Drivers of 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, 2021
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility All Other Consolidated*
            
Six months ended March 31, 2020 GAAP earnings$(151,299) $40,192  $35,842  $58,082  $(2,294)  $(19,477)
            
Items impacting comparability:           
Impairment of oil and gas properties177,761          177,761 
Tax impact of impairment of oil and gas properties(48,503)         (48,503)
Deferred tax valuation allowance60,463    (3,769)   76   56,770 
Unrealized (gain) loss on other investments        6,433   6,433 
Tax impact of unrealized (gain) loss on other investments        (1,351)  (1,351)
Six months ended March 31, 2020 adjusted operating results38,422  40,192  32,073  58,082  2,864   171,633 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production82,667          82,667 
Higher (lower) crude oil production(3,955)         (3,955)
Higher (lower) realized natural gas prices, after hedging(1,564)         (1,564)
Higher (lower) realized crude oil prices, after hedging(6,277)         (6,277)
            
Midstream and All Other Revenues           
Higher (lower) operating revenues  18,173  21,500    (1,123)  38,550 
            
Downstream Margins***           
Impact of usage and weather      321    321 
System modernization tracker revenues      2,481    2,481 
Regulatory revenue adjustments      (1,018)   (1,018)
Higher (lower) energy marketing margins        (4,668)  (4,668)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(23,745)         (23,745)
Lower (higher) operating expenses(2,519) 1,623  (3,943) (3,313) 2,129   (6,023)
Lower (higher) property, franchise and other taxes(706)         (706)
Lower (higher) depreciation / depletion(1,728) (4,927) (4,411) (729)   (11,795)
            
Other Income (Expense)           
(Higher) lower other deductions  (888)     1,572   684 
(Higher) lower interest expense(2,149) (5,545) (3,123)   (1,067)  (11,884)
            
Income Taxes           
Lower (higher) income tax expense / effective tax rate(5,609) 457  (235) (1,167) 1,233   (5,321)
            
All other / rounding244  27  73  424  (13)  755 
Six months ended March 31, 2021 adjusted operating results73,081  49,112  41,934  55,081  927   220,135 
            
Items impacting comparability:           
Impairment of oil and gas properties(76,152)         (76,152)
Tax impact of impairment of oil and gas properties20,980          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 debt4,062    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 GAAP earnings$7,199  $49,112  $41,250  $55,081  $37,568   $190,210 
            
* Amounts do not reflect intercompany eliminations.           
** 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, 2021
(Unaudited)
            
 Upstream Midstream Downstream    
            
 Exploration & Pipeline &     Corporate /  
 Production Storage Gathering Utility All Other Consolidated*
Six months ended March 31, 2020 GAAP earnings per share$(1.75) $0.46  $0.42  $0.67  $(0.03) $(0.23)
Items impacting comparability:           
Impairment of oil and gas properties, net of tax1.49          1.49 
Deferred tax valuation allowance0.70    (0.04)     0.66 
Unrealized (gain) loss on other investments, net of tax        0.06  0.06 
Earnings per share impact of diluted shares    (0.01)   0.01   
Six months ended March 31, 2020 adjusted operating results per share0.44  0.46  0.37  0.67  0.04  1.98 
            
Drivers of adjusted operating results**           
            
Upstream Revenues           
Higher (lower) natural gas production0.90          0.90 
Higher (lower) crude oil production(0.04)         (0.04)
Higher (lower) realized natural gas prices, after hedging(0.02)         (0.02)
Higher (lower) realized crude oil prices, after hedging(0.07)         (0.07)
            
Midstream and All Other Revenues           
Higher (lower) operating revenues  0.20  0.23    (0.01) 0.42 
            
Downstream Margins***           
Impact of usage and weather           
System modernization tracker revenues      0.03    0.03 
Regulatory revenue adjustments      (0.01)   (0.01)
Higher (lower) energy marketing margins        (0.05) (0.05)
            
Operating Expenses           
Lower (higher) lease operating and transportation expenses(0.26)         (0.26)
Lower (higher) operating expenses(0.03) 0.02  (0.04) (0.04) 0.02  (0.07)
Lower (higher) property, franchise and other taxes(0.01)         (0.01)
Lower (higher) depreciation / depletion(0.02) (0.05) (0.05) (0.01)   (0.13)
            
Other Income (Expense)           
(Higher) lower other deductions  (0.01)     0.02  0.01 
(Higher) lower interest expense(0.02) (0.06) (0.03)   (0.01) (0.12)
            
Income Taxes           
Lower (higher) income tax expense / effective tax rate(0.06)     (0.01) 0.01  (0.06)
            
Impact of additional shares(0.02) (0.02) (0.02) (0.04)   (0.10)
All other / rounding0.01    (0.01) 0.01  (0.01)  
Six months ended March 31, 2021 adjusted operating results per share0.80  0.54  0.45  0.60  0.01  2.40 
            
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 GAAP earnings per share$0.08  $0.54  $0.45  $0.60  $0.41  $2.08 
            
* Amounts do not reflect intercompany eliminations.           
** 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 2021 2020 2021 2020
Operating Revenues:        
Utility and Energy Marketing Revenues $270,849  $282,634  $460,315  $510,660 
Exploration and Production and Other Revenues 220,281  156,542  412,316  323,735 
Pipeline and Storage and Gathering Revenues 59,985  51,919  119,644  100,888 
  551,115  491,095  992,275  935,283 
Operating Expenses:        
Purchased Gas 106,661  118,270  158,280  210,542 
Operation and Maintenance:        
Utility and Energy Marketing 52,058  51,725  96,944  94,981 
Exploration and Production and Other 41,895  39,959  83,922  76,652 
Pipeline and Storage and Gathering 28,133  27,305  56,231  53,190 
Property, Franchise and Other Taxes 23,987  22,743  46,768  45,887 
Depreciation, Depletion and Amortization 84,342  77,912  167,462  152,830 
Impairment of Oil and Gas Producing Properties   177,761  76,152  177,761 
  337,076  515,675  685,759  811,843 
Gain on Sale of Timber Properties     51,066   
Operating Income (Loss) 214,039  (24,580) 357,582  123,440 
         
Other Income (Expense):        
Other Income (Deductions) (10,875) (17,480) (13,051) (20,520)
Interest Expense on Long-Term Debt (48,820) (25,270) (81,076) (50,713)
Other Interest Expense (1,698) (1,892) (3,618) (3,443)
         
Income (Loss) Before Income Taxes 152,646  (69,222) 259,837  48,764 
         
Income Tax Expense 40,210  36,846  69,627  68,241 
         
Net Income (Loss) Available for Common Stock $112,436  $(106,068) $190,210  $(19,477)
         
Earnings (Loss) Per Common Share        
Basic $1.23  $(1.23) $2.09  $(0.23)
Diluted $1.23  $(1.23) $2.08  $(0.23)
         
Weighted Average Common Shares:        
Used in Basic Calculation 91,163,291 86,561,066 91,084,620 86,469,258
Used in Diluted Calculation 91,645,679 86,561,066 91,581,918 86,469,258
         


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 March 31, September 30,
(Thousands of Dollars)2021 2020
    
ASSETS   
Property, Plant and Equipment$12,648,604  $12,351,852 
Less - Accumulated Depreciation, Depletion and Amortization 6,572,534   6,353,785 
Net Property, Plant and Equipment 6,076,070   5,998,067 
Assets Held for Sale, Net    53,424 
    
Current Assets:   
Cash and Temporary Cash Investments 80,467   20,541 
Receivables - Net 229,479   143,583 
Unbilled Revenue 32,685   17,302 
Gas Stored Underground 5,745   33,338 
Materials, Supplies and Emission Allowances 52,212   51,877 
Unrecovered Purchased Gas Costs 479    
Other Current Assets 56,117   47,557 
Total Current Assets 457,184   314,198 
    
Other Assets:   
Recoverable Future Taxes 117,300   118,310 
Unamortized Debt Expense 11,443   12,297 
Other Regulatory Assets 147,099   156,106 
Deferred Charges 60,454   67,131 
Other Investments 147,421   154,502 
Goodwill 5,476   5,476 
Prepaid Post-Retirement Benefit Costs 89,101   76,035 
Fair Value of Derivative Financial Instruments 4,104   9,308 
Other    81 
Total Other Assets 582,398   599,246 
Total Assets$7,115,652  $6,964,935 
    
CAPITALIZATION AND LIABILITIES   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 91,163,797 Shares and 90,954,696 Shares, Respectively$91,164  $90,955 
Paid in Capital 1,009,075   1,004,158 
Earnings Reinvested in the Business 1,100,718   991,630 
Accumulated Other Comprehensive Loss (101,988)  (114,757)
Total Comprehensive Shareholders' Equity 2,098,969   1,971,986 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,627,033   2,629,576 
Total Capitalization 4,726,002   4,601,562 
        
Current and Accrued Liabilities:       
Notes Payable to Banks and Commercial Paper    30,000 
Current Portion of Long-Term Debt     
Accounts Payable 107,305   134,126 
Amounts Payable to Customers 19,768   10,788 
Dividends Payable 40,562   40,475 
Interest Payable on Long-Term Debt 17,663   27,521 
Customer Advances    15,319 
Customer Security Deposits 19,503   17,199 
Other Accruals and Current Liabilities 176,940   140,176 
Fair Value of Derivative Financial Instruments 21,231   43,969 
Total Current and Accrued Liabilities 402,972   459,573 
        
Deferred Credits:       
Deferred Income Taxes 763,441   696,054 
Taxes Refundable to Customers 355,375   357,508 
Cost of Removal Regulatory Liability 237,867   230,079 
Other Regulatory Liabilities 177,685   161,573 
Pension and Other Post-Retirement Liabilities 118,804   127,181 
Asset Retirement Obligations 192,127   192,228 
Other Deferred Credits 141,379   139,177 
Total Deferred Credits 1,986,678   1,903,800 
Commitments and Contingencies     
Total Capitalization and Liabilities$7,115,652  $6,964,935 


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended
 March 31,
(Thousands of Dollars)2021 2020
    
Operating Activities:   
Net Income (Loss) Available for Common Stock$190,210  $(19,477)
Adjustments to Reconcile Net Income (Loss) to Net Cash
   
Provided by Operating Activities:     
Gain on Sale of Timber Properties(51,066)  
Impairment of Oil and Gas Producing Properties76,152  177,761 
Depreciation, Depletion and Amortization167,462  152,830 
Deferred Income Taxes61,408  104,883 
Premium Paid on Early Redemption of Debt15,715   
Stock-Based Compensation8,657  7,580 
Other6,742  9,800 
Change in:   
Receivables and Unbilled Revenue(101,159) (58,248)
Gas Stored Underground and Materials, Supplies and Emission Allowances27,258  20,086 
Unrecovered Purchased Gas Costs(479) 2,246 
Other Current Assets(8,447) (3,134)
Accounts Payable8,613  (5,465)
Amounts Payable to Customers8,980  13,196 
Customer Advances(15,319) (12,429)
Customer Security Deposits2,304  (1,211)
Other Accruals and Current Liabilities9,058  9,076 
Other Assets11,039  (10,359)
Other Liabilities5  3,857 
Net Cash Provided by Operating Activities$417,133  $390,992 
    
Investing Activities:   
Capital Expenditures$(338,867) $(395,486)
Net Proceeds from Sale of Timber Properties104,582   
Other12,095  4,167 
Net Cash Used in Investing Activities$(222,190) $(391,319)
    
Financing Activities:   
Changes in Notes Payable to Banks and Commercial Paper$(30,000) $174,800 
Reduction of Long-Term Debt(515,715)  
Dividends Paid on Common Stock(81,035) (75,197)
Net Proceeds From Issuance of Long-Term Debt495,267   
Net Repurchases of Common Stock(3,534) (4,153)
Net Cash Provided by (Used in) Financing Activities$(135,017) $95,450 
    
Net Increase in Cash, Cash Equivalents, and Restricted Cash59,926  95,123 
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period20,541  27,260 
Cash, Cash Equivalents, and Restricted Cash at March 31$80,467  $122,383 


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 SEGMENT2021 2020
 Variance 20212020 Variance
Total Operating Revenues$220,187  $155,560  $64,627  $411,582 $321,499  $90,083 
                       
Operating Expenses:                      
Operation and Maintenance:                      
General and Administrative Expense17,899  17,429  470  34,852 32,809  2,043 
Lease Operating and Transportation Expense67,008  51,730  15,278  132,588 102,531  30,057 
All Other Operation and Maintenance Expense3,515  3,084  431  7,187 6,041  1,146 
Property, Franchise and Other Taxes4,619  3,471  1,148  9,065 8,171  894 
Depreciation, Depletion and Amortization46,139  45,136  1,003  91,471 89,284  2,187 
Impairment of Oil and Gas Producing Properties  177,761  (177,761) 76,152 177,761  (101,609)
 139,180  298,611  (159,431) 351,315 416,597  (65,282)
          
Operating Income (Loss)81,007   (143,051) 224,058  60,267  (95,098) 155,365 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(286) (395) 109  (570)(790) 220 
Interest and Other Income67  208  (141) 158 441  (283)
Interest Expense on Long-Term Debt(15,119)   (15,119) (15,119)  (15,119)
Interest Expense(15,103) (14,163) (940) (30,594)(28,220) (2,374)
          
Income (Loss) Before Income Taxes50,566  (157,401) 207,967  14,142 (123,667) 137,809 
Income Tax Expense13,744  17,874  (4,130) 6,943 27,632  (20,689)
Net Income (Loss)$36,822  $(175,275) $212,097  $7,199 $(151,299) $158,498 
          
Net Income (Loss) Per Share (Diluted)$0.40  $(2.03) $2.43  $0.08 $(1.75) $1.83 
          


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 SEGMENT2021 2020 Variance 20212020Variance
Revenues from External Customers$59,314  $51,919  $7,395  $118,623 $100,888 $17,735 
Intersegment Revenues27,390  27,326  64  55,846 50,577 5,269 
Total Operating Revenues86,704  79,245  7,459  174,469 151,465 23,004 
          
Operating Expenses:         
Purchased Gas216  (3) 219  229 (10)239 
Operation and Maintenance19,718  22,014  (2,296) 40,891 42,945 (2,054)
Property, Franchise and Other Taxes8,200  8,132  68  16,643 16,487 156 
Depreciation, Depletion and Amortization15,729  13,356  2,373  31,197 24,960 6,237 
 43,863  43,499  364  88,960 84,382 4,578 
          
Operating Income42,841  35,746  7,095  85,509 67,083 18,426 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit (Costs) Credit125  (174) 299  250 (349)599 
Interest and Other Income939  1,535  (596) 1,795 3,088 (1,293)
Interest Expense(10,552) (7,152) (3,400) (21,283)(14,264)(7,019)
          
Income Before Income Taxes33,353  29,955  3,398  66,271 55,558 10,713 
Income Tax Expense8,425  7,868  557  17,159 15,366 1,793 
Net Income$24,928  $22,087  $2,841  $49,112 $40,192 $8,920 
          
Net Income Per Share (Diluted)$0.27  $0.26  $0.01  $0.54 $0.46 $0.08 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,
GATHERING SEGMENT2021 2020 Variance 20212020Variance
Revenues from External Customers$671  $  $671  $1,021 $ $1,021 
Intersegment Revenues49,591  35,267  14,324  96,249 70,055 26,194 
Total Operating Revenues50,262  35,267  14,995  97,270 70,055 27,215 
          
Operating Expenses:         
Operation and Maintenance8,833  5,702  3,131  16,035 11,044 4,991 
Property, Franchise and Other Taxes5  24  (19) 18 38 (20)
Depreciation, Depletion and Amortization8,096  5,279  2,817  16,001 10,418 5,583 
 16,934  11,005  5,929  32,054 21,500 10,554 
          
Operating Income33,328  24,262  9,066  65,216 48,555 16,661 
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(68) (71) 3  (135)(143)8 
Interest and Other Income9  89  (80) 243 157 86 
Interest Expense on Long-Term Debt(965)   (965) (965) (965)
Interest Expense(4,201) (2,160) (2,041) (8,332)(4,379)(3,953)
          
Income Before Income Taxes28,103  22,120  5,983  56,027 44,190 11,837 
Income Tax Expense7,403  2,222  5,181  14,777 8,348 6,429 
Net Income$20,700  $19,898  $802  $41,250 $35,842 $5,408 
          
Net Income Per Share (Diluted)$0.23  $0.23  $  $0.45 $0.42 $0.03 
          


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 SEGMENT2021 2020 Variance 20212020Variance
Revenues from External Customers$270,784   $250,556   $20,228   $459,684  $445,465  $14,219  
Intersegment Revenues97   3,937   (3,840) 197  5,853  (5,656)
Total Operating Revenues270,881   254,493   16,388   459,881  451,318  8,563  
          
Operating Expenses:         
Purchased Gas133,132   119,411   13,721   210,164  204,116  6,048  
Operation and Maintenance52,864   51,070   1,794   98,116  93,913  4,203  
Property, Franchise and Other Taxes11,000   10,820   180   20,748  20,634  114  
Depreciation, Depletion and Amortization14,311   13,751   560   28,305  27,382  923  
 211,307   195,052   16,255   357,333  346,045  11,288  
          
Operating Income59,574   59,441   133   102,548  105,273  (2,725)
          
Other Income (Expense):         
Non-Service Pension and Post-Retirement Benefit Costs(12,243) (12,388) 145   (18,927)(19,151)224  
Interest and Other Income443   294   149   1,181  1,245  (64)
Interest Expense(5,495) (5,516) 21   (10,947)(11,190)243  
          
Income Before Income Taxes42,279   41,831   448   73,855  76,177  (2,322)
Income Tax Expense10,235   10,332   (97) 18,774  18,095  679  
Net Income$32,044   $31,499   $545   $55,081  $58,082  $(3,001)
          
Net Income Per Share (Diluted)$0.35   $0.36   $(0.01) $0.60  $0.67  $(0.07)
          


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 OTHER20212020 Variance 20212020Variance
Revenues from External Customers$64 $32,925  $(32,861) $1,175 $67,161 $(65,986)
Intersegment Revenues1 79  (78) 20 256 (236)
Total Operating Revenues65 33,004  (32,939) 1,195 67,417 (66,222)
Operating Expenses:        
Purchased Gas6 29,151  (29,145) 2,293 61,184 (58,891)
Operation and Maintenance(81)1,875  (1,956) 683 3,578 (2,895)
Property, Franchise and Other Taxes38 176  (138) 47 320 (273)
Depreciation, Depletion and Amortization9 206  (197) 394 408 (14)
 (28)31,408  (31,436) 3,417 65,490 (62,073)
Gain on Sale of Timber Properties     51,066  51,066 
Operating Income93 1,596  (1,503) 48,844 1,927 46,917 
         
Other Income (Expense):        
Non-Service Pension and Post-Retirement Benefit Costs(3) (69) 66  (7)(138)131 
Interest and Other Income41 193  (152) 225 471 (246)
Interest Expense (24) 24   (42)42 
         
Income before Income Taxes131 1,696  (1,565) 49,062 2,218 46,844 
Income Tax Expense1,114 527  587  12,485 678 11,807 
Net Income (Loss)$(983)$1,169  $(2,152) $36,577 $1,540 $35,037 
Net Income (Loss) Per Share (Diluted)$(0.01)$0.01  $(0.02) $0.40 $0.02 $0.38 
      
 Three Months Ended Six Months Ended
 March 31, March 31,
CORPORATE20212020 Variance 20212020Variance
Revenues from External Customers$95 $135  $(40) $190 $270 $(80)
Intersegment Revenues1,027 1,094  (67) 1,691 2,187 (496)
Total Operating Revenues1,122 1,229  (107) 1,881 2,457 (576)
Operating Expenses:        
Operation and Maintenance3,743 3,499  244  6,342 6,142 200 
Property, Franchise and Other Taxes125 120  5  247 237 10 
Depreciation, Depletion and Amortization58 184  (126) 94 378 (284)
 3,926 3,803  123  6,683 6,757 (74)
         
Operating Loss(2,804)(2,574) (230) (4,802)(4,300)(502)
         
Other Income (Expense):        
Non-Service Pension and Post-Retirement Benefit Costs(922)(775) (147) (1,846)(1,550)(296)
Interest and Other Income35,317 22,801  12,516  74,296 53,874 20,422 
Interest Expense on Long-Term Debt(32,736)(25,270) (7,466) (64,992)(50,713)(14,279)
Other Interest Expense(641)(1,605) 964  (2,176)(3,023)847 
         
Income (Loss) before Income Taxes(1,786)(7,423) 5,637  480 (5,712)6,192 
Income Tax Expense (Benefit)(711)(1,977) 1,266  (511)(1,878)1,367 
Net Income (Loss)$(1,075)$(5,446) $4,371  $991 $(3,834)$4,825 
Net Income (Loss) Per Share (Diluted)$(0.01)$(0.06) $0.05  $0.01 $(0.05)$0.06 
         
         
 Three Months Ended Six Months Ended
 March 31, March 31,
INTERSEGMENT ELIMINATIONS20212020 Variance 20212020Variance
Intersegment Revenues$(78,106)$(67,703) $(10,403) $(154,003)$(128,928)$(25,075)
Operating Expenses:        
Purchased Gas(26,693)(30,289) 3,596  (54,406)(54,748)342 
Operation and Maintenance(51,413)(37,414) (13,999) (99,597)(74,180)(25,417)
 (78,106)(67,703) (10,403) (154,003)(128,928)(25,075)
Operating Income        
Other Income (Expense):        
Interest and Other Deductions(34,294)(28,728) (5,566) (69,714)(57,675)(12,039)
Interest Expense34,294 28,728  5,566  69,714 57,675 12,039 
Net Income$ $  $  $ $ $ 
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
 2021 2020 (Decrease) 2021 2020 (Decrease)
            
Capital Expenditures:           
Exploration and Production$88,271 (1)$102,424 (3)$(14,153) $169,610 (1)(2)$229,343 (3)(4)$(59,733)
Pipeline and Storage47,970 (1)25,554 (3)22,416  91,693 (1)(2)82,638 (3)(4)9,055 
Gathering11,099 (1)15,072 (3)(3,973) 19,419 (1)(2)24,910 (3)(4)(5,491)
Utility24,480 (1)19,457 (3)5,023  41,825 (1)(2)36,622 (3)(4)5,203 
Total Reportable Segments171,820  162,507  9,313  322,547  373,513  (50,966)
All Other  1  (1)   22  (22)
Corporate50  134  (84) 89  320  (231)
Eliminations(373)   (373) (219)   (219)
Total Capital Expenditures$171,497  $162,642  $8,855  $322,417  $373,855  $(51,438)


(1) 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.

(2)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.

(3) Capital expenditures for the quarter and six months ended March 31, 2020, include accounts payable and accrued liabilities related to capital expenditures of $41.2 million, $9.7 million, $4.4 million, and $4.2 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, 2020, since they represent non-cash investing activities at that date.

(4)Capital expenditures for the six months ended March 31, 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 six months ended March 31, 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 March 31, 2020.
  


DEGREE DAYS         
       Percent Colder
       (Warmer) Than:
Three Months Ended March 31,Normal 2021 2020 Normal (1) Last Year (1)
          
Buffalo, NY3,290 2,978 2,738 (9.5) 8.8 
Erie, PA3,108 2,750 2,555 (11.5) 7.6 
          
Six Months Ended March 31,         
          
Buffalo, NY5,543 4,899 4,970 (11.6) (1.4)
Erie, PA5,152 4,447 4,461 (13.7) (0.3)
 
(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 Six Months Ended
  March 31, March 31,
      Increase     Increase
  2021 2020 (Decrease) 2021 2020 (Decrease)
             
Gas Production/Prices:            
Production (MMcf)            
Appalachia 81,446  55,638 25,808  157,115  109,922  47,193 
West Coast 428  479 (51) 869  966  (97)
Total Production 81,874  56,117 25,757  157,984  110,888  47,096 
             
Average Prices (Per Mcf)            
Appalachia $2.28  $1.77 $0.51  $2.23  $1.97  $0.26 
West Coast 7.14  4.34 2.80  6.07  4.67  1.40 
Weighted Average 2.31  1.80 0.51  2.25  1.99  0.26 
Weighted Average after Hedging 2.28  2.12 0.16  2.21  2.22  (0.01)
             
Oil Production/Prices:            
Production (Thousands of Barrels)            
Appalachia 1  1   1  2  (1)
West Coast 561  605 (44) 1,124  1,206  (82)
Total Production 562  606 (44) 1,125  1,208  (83)
             
Average Prices (Per Barrel)            
Appalachia $48.47  $55.90 $(7.43) $43.83  $55.48  $(11.65)
West Coast 59.83  49.91 9.92  51.64  56.25  (4.61)
Weighted Average 59.82  49.92 9.90  51.63  56.25  (4.62)
Weighted Average after Hedging 57.11  58.23 (1.12) 53.50  60.57  (7.07)
             
Total Production (MMcfe) 85,246  59,753 25,493  164,734  118,136  46,598 
             
Selected Operating Performance Statistics:            
General & Administrative Expense per Mcfe (1) $0.21  $0.29 $(0.08) $0.21  $0.28  $(0.07)
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.79  $0.87 $(0.08) $0.80  $0.87  $(0.07)
Depreciation, Depletion & Amortization per Mcfe (1) $0.54  $0.76 $(0.22) $0.56  $0.76  $(0.20)


 (1)Refer to page 15 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment.
  
 (2)Amounts include transportation expense of $0.57 and $0.56 per Mcfe for the three months ended March 31, 2021 and March 31, 2020, respectively. Amounts include transportation expense of $0.57 and $0.57 per Mcfe for the six months ended March 31, 2021 and March 31, 2020, respectively.


NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
       
EXPLORATION AND PRODUCTION INFORMATION
 
       
Hedging Summary for Remaining Six Months of Fiscal 2021 Volume  Average Hedge Price
Oil Swaps      
Brent 708,000 BBL $57.57 / BBL
NYMEX 78,000 BBL $51.00 / BBL
Total 786,000 BBL $56.91 / BBL
       
Gas Swaps      
NYMEX 74,340,000 MMBTU $2.62 / MMBTU
No Cost Collars 14,100,000 MMBTU $2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales 47,653,084 MMBTU $2.26 / MMBTU
Total 136,093,084 MMBTU   
       
Hedging Summary for Fiscal 2022 Volume  Average Hedge Price
Oil Swaps      
Brent 900,000 BBL $56.66 / BBL
NYMEX 156,000 BBL $51.00 / BBL
Total 1,056,000 BBL $55.83 / BBL
       
Gas Swaps      
NYMEX 144,590,000 MMBTU $2.66 / MMBTU
No Cost Collars 2,350,000 MMBTU $2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling)
Fixed Price Physical Sales 46,867,111 MMBTU $2.23 / MMBTU
Total 193,807,111 MMBTU   
       
Hedging Summary for Fiscal 2023 Volume  Average Hedge Price
Oil Swaps      
Brent 240,000 BBL $54.25 / BBL
Total 240,000 BBL $54.25 / BBL
       
Gas Swaps      
NYMEX 24,700,000 MMBTU $2.55 / MMBTU
Fixed Price Physical Sales 38,408,538 MMBTU $2.24 / MMBTU
Total 63,108,538 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 1,150,000 MMBTU $2.45 / MMBTU
Fixed Price Physical Sales 20,817,022 MMBTU $2.23 / MMBTU
Total 21,967,022 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
       
Fixed Price Physical Sales 2,293,200 MMBTU $2.18 / 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
  2021 2020 (Decrease) 2021 2020 (Decrease)
Firm Transportation - Affiliated 43,124  42,602  522  73,088  77,269  (4,181)
Firm Transportation - Non-Affiliated 166,372  153,197  13,175  339,436  327,178  12,258 
Interruptible Transportation 435  531  (96) 1,024  1,244  (220)
  209,931  196,330  13,601  413,548  405,691  7,857 
             
Gathering Volume - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2021 2020 (Decrease) 2021 2020 (Decrease)
Gathered Volume 95,121  65,134  29,987  183,466  129,526  53,940 
             
             
Utility Throughput - (MMcf)            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2021 2020 (Decrease) 2021 2020 (Decrease)
Retail Sales:            
Residential Sales 29,052  26,155  2,897  47,465  45,631  1,834 
Commercial Sales 4,309  4,033  276  6,836  6,846  (10)
Industrial Sales 223  183  40  376  400  (24)
  33,584  30,371  3,213  54,677  52,877  1,800 
Transportation 24,584  25,157  (573) 42,518  45,712  (3,194)
  58,168  55,528  2,640  97,195  98,589  (1,394)
             

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 three and six months ended March 31, 2021 and 2020:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands except per share amounts) 2021 2020 2021 2020
Reported GAAP Earnings $112,436  $(106,068) $190,210  $(19,477)
Items impacting comparability:        
Impairment of oil and gas properties (E&P)   177,761  76,152  177,761 
Tax impact of impairment of oil and gas properties   (48,503) (20,980) (48,503)
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)  
Deferred tax valuation allowance   56,770    56,770 
Unrealized (gain) loss on other investments (Corporate/All Other) (848) 5,414  450  6,433 
Tax impact of unrealized (gain) loss on other investments 178  (1,137) (94) (1,351)
Adjusted Operating Results $123,160  $84,237  $220,135  $171,633 
         
Reported GAAP Earnings Per Share $1.23  $(1.23) $2.08  $(0.23)
Items impacting comparability:        
Impairment of oil and gas properties, net of tax (E&P)   1.49  0.60  1.49 
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   
Deferred tax valuation allowance   0.66    0.66 
Unrealized (gain) loss on other investments, net of tax (Corporate/All Other) (0.01) 0.05    0.06 
Adjusted Operating Results Per Share $1.34  $0.97  $2.40  $1.98 

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, 2021 and 2020:

  Three Months Ended Six Months Ended
  March 31, March 31,
(in thousands) 2021 2020 2021 2020
Reported GAAP Earnings $112,436   $(106,068) $190,210   $(19,477)
Depreciation, Depletion and Amortization 84,342   77,912   167,462   152,830  
Other (Income) Deductions 10,875   17,480   13,051   20,520  
Interest Expense 50,518   27,162   84,694   54,156  
Income Taxes 40,210   36,846   69,627   68,241  
Impairment of Oil and Gas Producing Properties —   177,761   76,152   177,761  
Gain on Sale of Timber Properties —   —   (51,066) —  
Adjusted EBITDA $298,381   $231,093   $550,130   $454,031  
         
Adjusted EBITDA by Segment        
Pipeline and Storage Adjusted EBITDA $58,570   $49,102   $116,706   $92,043  
Gathering Adjusted EBITDA 41,424   29,541   81,217   58,973  
Total Midstream Businesses Adjusted EBITDA 99,994   78,643   197,923   151,016  
Exploration and Production Adjusted EBITDA 127,146   79,846   227,890   171,947  
Utility Adjusted EBITDA 73,885   73,192   130,853   132,655  
Corporate and All Other Adjusted EBITDA (2,644) (588) (6,536) (1,587)
Total Adjusted EBITDA $298,381   $231,093   $550,130   $454,031  
                 


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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) 2021 2020 2021 2020
Exploration and Production Segment        
Reported GAAP Earnings $36,822  $(175,275) $7,199  $(151,299)
Depreciation, Depletion and Amortization 46,139  45,136  91,471  89,284 
Other (Income) Deductions 219  187  412  349 
Interest Expense 30,222  14,163  45,713  28,220 
Income Taxes 13,744  17,874  6,943  27,632 
Impairment of Oil and Gas Producing Properties   177,761  76,152  177,761 
Adjusted EBITDA $