02/05/2019 21:45:00

National Fuel Reports Second Quarter Earnings

WILLIAMSVILLE, N.Y., May 02, 2019 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2019 fiscal year and for the six months ended March 31, 2019.

FISCAL 2019 SECOND QUARTER SUMMARY

  • GAAP earnings of $90.6 million, or $1.04 per share, compared to $91.8 million, or $1.06 per share, in the prior year
  • Adjusted operating results of $92.9 million, or $1.07 per share, compared to $95.6 million, or $1.11 per share, in the prior year (see non-GAAP reconciliation below)
  • Consolidated Adjusted EBITDA of $225.8 million compared to $232.4 million in the prior year (see non-GAAP reconciliation on page 24)
  • E&P segment net production of 48.8 Bcfe, an increase of 6% from the prior year
  • Appalachian net natural gas production of 499 MMcf/d, up 8% from the prior year and up 1% from the first quarter
  • Average natural gas prices, after the impact of hedging, of $2.58 per Mcf, up $0.06 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $61.01 per Bbl, up $2.70 per Bbl from the prior year
  • Gathering segment operating revenues increased $1.6 million on 5% increase in gathered volumes
  • Utility segment net income increased $2.2 million, or 7%, on higher customer margins and lower interest expense

         
  

Three Months Ended

 

Six Months Ended

  

March 31,

 

March 31,

(in thousands except per share amounts)

 

2019

 

2018

 

2019

 

2018

Reported GAAP Earnings

 $90,595  $91,847  $193,256  $290,501 

Items impacting comparability

        
Remeasurement of deferred income taxes under 2017 Tax Reform   4,000  (5,000) (107,000)
Unrealized (gain) loss on hedge ineffectiveness (E&P) 6,742  (335) 237  98 
Tax impact of unrealized (gain) loss on hedge ineffectiveness (1,416) 82  (50) (24)
Unrealized (gain) loss on other investments (Corporate / All Other) (3,831)   2,516   
Tax impact of unrealized (gain) loss on other investments 805    (528)  

Adjusted Operating Results

 $92,895  $95,594  $190,431  $183,575 
         

Reported GAAP Earnings per share

 $1.04  $1.06  $2.23  $3.37 

Items impacting comparability

        
Remeasurement of deferred income taxes under 2017 Tax Reform   0.05  (0.06) (1.24)
Unrealized (gain) loss on hedge ineffectiveness (E&P) 0.08       
Tax impact of unrealized (gain) loss on hedge ineffectiveness (0.02)      
Unrealized (gain) loss on other investments (Corporate / All Other) (0.04)   0.03   
Tax impact of unrealized (gain) loss on other investments 0.01    (0.01)  
Rounding     0.01   

Adjusted Operating Results per share

 $1.07  $1.11  $2.20  $2.13 
                 

MANAGEMENT COMMENTS

Ronald J. Tanski, President and Chief Executive Officer of National Fuel Gas Company, stated: “The Company’s second fiscal quarter results evidence the value of our integrated business model, where the consistent earnings from each of our major operating segments contributed to our balanced consolidated earnings.  Our financial results were in line with our forecast for the quarter, and keep us on track to deliver results in line with our fiscal year earnings guidance, which remains unchanged.

“Financial results in our regulated businesses were consistent with the prior year, where higher earnings in the utility business offset a portion of the expected decline in the interstate pipeline business caused by the expiration of a large transportation contract.  In our Exploration & Production business, we experienced a few operational delays during the quarter, which deferred a portion of our production that was scheduled to come online this quarter into the latter part of fiscal 2019.   We still expect, however, that our steady, three-rig drilling program will deliver average production growth of 15 to 20 percent through our fiscal 2022 forecast period.  Given our large undeveloped acreage position, our production growth can be sustained throughout the next decade.

“We are excited that that our various Pipeline & Storage projects under development continue to take meaningful strides forward, including the recent receipt of the FERC Certificate for our Empire North project, positive legal and regulatory developments on our Northern Access project, and the commencement of construction on our Line N to Monaca project.  Each of these projects will help to meet the increasing regional demand for domestic and abundant natural gas supplies. As the nation’s electric grid continues to decrease reliance on aging coal-fired plants and integrate more intermittent renewable generation facilities, more reliance will be placed on natural gas electric generation, much like many of our residential customers depend on their gas-powered back-up generators.”

FISCAL 2019 GUIDANCE

National Fuel is reaffirming its full year earnings guidance for fiscal 2019.  The Company projects that earnings on a non-GAAP basis will be within the range of $3.45 to $3.65 per share, or $3.55 per share at the midpoint of the range. The Company’s earnings guidance range reflects the impact of actual results for the six months ended March 31, 2019, an update to the Company’s commodity price assumptions to reflect the current futures market, including a $10 per barrel increase in NYMEX crude oil, offset by the consolidated impact of the reduction in its production guidance discussed below.  Further changes in NYMEX or Appalachian basin spot natural gas prices are not expected to have a significant impact on current year earnings as the realizations on a large portion of the Company’s remaining natural gas production are locked in with firm sales and financial hedges. Projections for consolidated and individual segment capital expenditures are unchanged.

The Company is revising its Exploration and Production segment’s fiscal 2019 net production guidance to be in the range of 205 to 215 billion cubic feet equivalent (“Bcfe”).  At the midpoint of the range, the Company’s revised fiscal 2019 production guidance represents an 18 percent increase over fiscal 2018.

The 10 Bcfe, or 5 percent, decrease from the midpoint of the Company’s previous guidance range is primarily due to the following factors:

  • Drilling and completion delays at DCNR tracts 007 and 100 in the EDA, which has deferred forecasted production online dates;

  • The impact of the Company's ongoing testing efforts to optimize its Utica drilling and completion design in the WDA; and

  • The Company's continued trend towards drilling longer laterals, which is expected to benefit the program's economics, but defers the online dates related to future development pads beyond the previous plan.

While the delays in new well turn on dates have the effect of pushing production to future periods, they are not expected to have a material impact on the ultimate recovery of the Company’s reserves or the economics of its Marcellus and Utica programs.

The Company’s earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the six months ended March 31, 2019, including: (1) the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s income tax expense and benefited consolidated earnings in the six months ended March 31, 2019 by $0.06 per share; (2) the full year impact of the Exploration and Production segment’s unrealized gain on hedging ineffectiveness; and (3) the unrealized loss on other investments due to the change in an accounting rule discussed on page 6, which lowered earnings by $0.02 per share.  While the Company expects to record additional adjustments to one or more of these items during the remaining six months ending September 30, 2019, 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.

Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2019 are outlined in the table on page 8.

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of earnings of each operating segment for the quarter ended March 31, 2019 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the six months ended March 31, 2019 are summarized on pages 11 and 12).  It may be helpful to refer to those tables while reviewing this discussion.  Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.

Upstream Business

Exploration and Production Segment

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

 

Three Months Ended

 

March 31,

(in thousands)

2019

 

2018

 

Variance

GAAP Earnings$21,873  $26,537  $(4,664)
Remeasurement of deferred taxes under 2017 Tax Reform$  $790  $(790)
Unrealized (gain) loss on hedge ineffectiveness$6,742  $(335) $7,077 
Tax impact of unrealized (gain) loss on hedge ineffectiveness$(1,416) $82  $(1,498)
Adjusted Operating Results$27,199  $27,074  $125 
      
Adjusted EBITDA$83,580  $78,728  $4,852 

The Exploration and Production segment’s second quarter GAAP earnings decreased $4.7 million versus the prior year, driven primarily by the net impact of unrealized gains and losses that were recognized due to hedge accounting ineffectiveness and an $0.8 million adjustment recorded in the prior year second quarter relating to the remeasurement of deferred income taxes under the 2017 Tax Reform Act.  Excluding these items (see table above), the Exploration and Production segment’s second quarter earnings increased $0.1 million as the positive impacts of higher natural gas production and better realized natural gas and crude oil prices were offset by lower crude oil production, higher lease operating and transportation (“LOE”) expense, higher depreciation, depletion and amortization (“DD&A”) expense, and the impact of income taxes.

Seneca’s second quarter net production was 48.8 Bcfe, an increase of 2.7 Bcfe, or 6 percent, from the prior year.  Natural gas production increased 3.3 billion cubic feet (“Bcf”), or 8 percent, due primarily to production from new Marcellus and Utica wells completed and connected to sales in Appalachia.  Seneca increased production in the WDA-Clermont area by 4.4 Bcf, where Seneca has increased development activity. Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.58 per thousand cubic feet ("Mcf"), an increase of $0.06 per Mcf from the prior year. The improvement was driven primarily by higher NYMEX pricing and local spot pricing in Pennsylvania, which benefited realizations on Seneca’s unhedged production.

Seneca’s oil production for the second quarter decreased 99 thousand barrels ("Mbbl") due largely to the impact of the sale of Seneca’s Sespe properties in California in the third quarter of fiscal 2018.  Seneca's average realized oil price, after the impact of hedging, was $61.01 per barrel ("Bbl"), an increase of $2.70 per Bbl over the prior year.  The improvement in oil price realizations was due primarily to stronger price differentials relative to West Texas Intermediate (WTI) index prices at local sales points in California.

LOE expense increased $2.1 million due mostly to higher gathering expenses in Appalachia resulting from the increase in natural gas production coupled with an increase in well repairs, contract labor and steam fuel costs in the West Coast region, partially offset by lower operating costs in California following the sale of Seneca’s Sespe properties.  DD&A expense increased $3.9 million due to the increase in production and a higher unit depletion rate.

The 2017 Tax Reform Act lowered the Company’s statutory federal income tax rate from a blended 24.5 percent in fiscal 2018 to 21 percent in fiscal 2019, which decreased the segment’s income tax expense on current period income by $1.0 million.  The impact of the lower federal rate on current quarter income was more than offset by the net effect of other items that increased income tax expense by $1.9 million.

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)

2019

 

2018

 

Variance

GAAP Earnings$17,749  $22,724  $(4,975)
      
Adjusted EBITDA$41,281  $49,786  $(8,505)

The Pipeline and Storage segment’s second quarter GAAP earnings decreased $5.0 million versus the prior year.  The decrease was driven primarily by lower operating revenues and higher operation and maintenance (“O&M”) expenses, which were partially offset by lower income tax expense due to the impact of the 2017 Tax Reform Act.   The $4.4 million decrease in operating revenues was due largely to the anticipated expiration of a significant firm transportation contract on the Empire system in December 2018.  The impact of the contract expiration was partially offset by an increase in Empire’s transportation rates following the Company’s rate case settlement effective January 1, 2019.  The settlement remains subject to FERC approval.  O&M expense increased $3.1 million due primarily to an increase in compressor and facility maintenance activity during the quarter and higher personnel costs.

The 2017 Tax Reform Act lowered the Company’s statutory federal income tax rate from a blended 24.5 percent in fiscal 2018 to 21 percent in fiscal 2019, which decreased the Pipeline and Storage segment’s income tax expense on current period income by $0.8 million.

Gathering Segment

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

 

Three Months Ended

 

March 31,

(in thousands)

2019

 

2018

 

Variance

GAAP Earnings$12,690  $11,770  $920 
Remeasurement of deferred taxes under 2017 Tax Reform$  $400  $(400)
Adjusted Operating Results$12,690  $12,170  $520 
      
Adjusted EBITDA$24,598  $24,220  $378 

The $0.9 million increase in the Gathering segment’s second quarter GAAP earnings was driven primarily by higher operating revenues and the net impact of the 2017 Tax Reform Act, which were partially offset by higher O&M expenses.  Operating revenues increased $1.6 million, or 6 percent, due primarily to a 2.8 Bcf increase in gathered volume from Seneca’s Appalachian natural gas production.  O&M expenses increased $1.3 million in the second quarter due largely to the operation of additional compression facilities along the Covington gathering system, which were acquired from affiliate Seneca in March 2018, and an increase in normal-course preventative compressor maintenance activity at the Clermont gathering system.

The 2017 Tax Reform Act lowered the Company’s statutory federal income tax rate from a blended 24.5 percent in fiscal 2018 to 21 percent in fiscal 2019, which decreased the segment’s income tax expense on current period income by $0.6 million.  Additionally, the Gathering segment recorded a $0.4 million adjustment in the prior year second quarter to the remeasurement of deferred income taxes under the 2017 Tax Reform Act, which increased income tax expense and lowered earnings in the prior year.

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)

2019

 

2018

 

Variance

GAAP Earnings$35,589  $33,360  $2,229 
      
Adjusted EBITDA$78,688  $80,591  $(1,903)

The $2.2 million increase in the Utility segment’s second quarter GAAP earnings was due primarily to higher customer margins and lower interest expense partially offset by the net impact of the 2017 Tax Reform Act.  Higher customer usage, an increase in revenues relating to a system modernization tracking mechanism, and the impact of regulatory adjustments contributed to the increase in customer margins. Interest expense decreased $0.6 million due primarily to the Company’s early refinancing of an 8.75 percent coupon 10-year note that was set to mature in May 2019. The $1.9 million increase in O&M expense was substantially offset by the $2.3 million decrease in other deductions, which was largely a result of non-service pension and postretirement benefit costs that are now reported separately from O&M expenses following the adoption of new accounting guidance in the current year.

The 2017 Tax Reform Act lowered the Company’s statutory federal income tax rate from a blended 24.5 percent in fiscal 2018 to 21 percent in fiscal 2019, which decreased income tax expense on current period income by $1.5 million.  In accordance with state regulatory orders, the Utility segment has been recording a refund provision to return the net effect of the 2017 Tax Reform Act to its customers.  The refund provision recorded during the quarter as a reduction to operating revenues was $3.7 million higher than the refund provision recorded in the prior year, reducing second quarter earnings by $2.8 million and offsetting the benefit of the lower federal income tax rate.

Energy Marketing Segment

The Energy Marketing segment's operations are carried out by National Fuel Resources, Inc. (“NFR”).  NFR markets natural gas to industrial, wholesale, commercial, public authority, and residential customers primarily in western and central New York and northwestern Pennsylvania, offering competitively priced natural gas to its customers.

 

Three Months Ended

 

March 31,

(in thousands)

2019

 

2018

 

Variance

GAAP Earnings$544  $578  $(34)
Remeasurement of deferred taxes under 2017 Tax Reform$  $159  $(159)
Adjusted Operating Results$544  $737  $(193)
      
Adjusted EBITDA$620  $1,048  $(428)

The Energy Marketing segment’s second quarter GAAP earnings were largely unchanged versus the prior year, as the slight decline in customer margins (operating revenues less purchased gas sold) was offset by the impact of an adjustment made in the prior year second quarter to the segment’s remeasurement of deferred income taxes under the 2017 Tax Reform Act.

Corporate and All Other

Corporate and All Other operations had combined earnings of $2.2 million in the current year second quarter, which was $5.3 million higher than the loss of $3.1 million in the prior year second quarter.  The increase in earnings was primarily attributable to the impact of the 2017 Tax Reform Act, which resulted in a remeasurement of deferred income taxes that increased the prior year’s second quarter income tax expense by $2.7 million, and the impact of $3.8 million in unrealized gains on investments in equity securities recorded during the quarter ($3.0 million after-tax).  Unrealized gains and losses on investments in equity securities are now recognized in earnings following the adoption of new accounting guidance in the current year.  These unrealized gains and losses had been previously recorded as other comprehensive income. These increases were partially offset by lower operating revenues from the sale of standing timber by the Company’s land and timber operations.

EARNINGS TELECONFERENCE

The Company will host a conference call on Friday, May 3, 2019, at 11 a.m. Eastern Time to discuss this announcement.  There are two ways to access this call.  For those with Internet access, visit the NFG Investor Relations News & Events page at National Fuel’s website at investor.nationalfuelgas.com.  For those without Internet access, audio access is also provided by dialing (toll-free) 833-287-0795, using conference ID number “6683755”.  For those unable to listen to the live conference call, an audio replay will be available approximately two hours following the teleconference at the same website link and by phone at (toll-free) 800-585-8367 using conference ID number “6683755”.  Both the webcast and a telephonic replay will be available until the close of business on Friday, May 10, 2019.

National Fuel is an integrated energy company reporting financial results for five operating segments: Exploration and Production, Pipeline and Storage, Gathering, Utility, and Energy Marketing.  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: delays or changes in costs or plans with respect to Company projects or related projects of other companies, including difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in 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; 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 the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; the impact of potential information technology, cybersecurity or data security breaches; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; significant differences between the Company’s projected and actual capital expenditures and operating expenses; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

GUIDANCE SUMMARY

As discussed on page 2, the Company is revising its earnings guidance for fiscal 2019.  Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2019 are outlined in the table below.

The Company's earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the six months ended March 31, 2019, including: (1) the remeasurement of deferred income taxes resulting from the 2017 Tax Reform Act, which reduced the Company’s income tax expense and benefited consolidated earnings in the six months ended March 31, 2019 by $0.06 per share; (2) the full year impact of the Exploration and Production segment’s unrealized gain on hedging ineffectiveness; and (3) the unrealized loss on other investments due to the change in an accounting rule discussed on page 6, which lowered earnings by $0.02 per share.  While the Company expects to record additional adjustments to one or more of these items during the remaining six months ending September 30, 2019, 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 2019 Guidance

 

Previous FY 2019 Guidance

Consolidated Earnings per Share

$3.45 to $3.65

 

$3.45 to $3.65

    

Consolidated Effective Tax Rate

~ 24% 24% to 25%
    

Capital Expenditures (Millions)

   
  Exploration and Production$460 - $495 $460 - $495
  Pipeline and Storage$120 - $150 $120 - $150
  Gathering$55 - $65 $55 - $65
  Utility

$90 - $100

 

$90 - $100

  Consolidated Capital Expenditures

$725 - $810

 

$725 - $810

    

Exploration & Production Segment Guidance

   
    

  Commodity Price Assumptions (1)

   
  NYMEX natural gas price$2.60 /MMBtu $3.25 /MMBtu | $2.75 /MMBtu
  Appalachian basin spot price$2.10 /MMBtu $2.75 /MMBtu | $2.25 /MMBtu
  NYMEX (WTI) crude oil price$65.00 /Bbl $55.00 /Bbl
  California oil price (% of WTI)108% 102%
    

  Production (Bcfe)

   
  East Division - Appalachia189 to 199 194 to 214
  West Division - California

~ 16

 

~ 16

  Total Production

205 to 215

 

210 to 230

    

  E&P Operating Costs ($/Mcfe)

   
  LOE$0.85 - $0.90 $0.85 - $0.90
  G&A$0.25 - $0.35 $0.25 - $0.35
  DD&A$0.70 - $0.75 $0.70 - $0.75
    

Other Business Segment Guidance (Millions)

   
  Gathering Segment Revenues$125 - $130 $130 - $140
  Pipeline and Storage Segment Revenues~$285 ~$285

(1)  Revised commodity price assumptions reflect the Company's forecast for the remainder of fiscal 2019.

 

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

QUARTER ENDED MARCH 31, 2019

(Unaudited)

              
 

Upstream

 

Midstream

Businesses

 

Downstream

Businesses

    
              
 Exploration & Pipeline &     Energy Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility Marketing All Other Consolidated*
              

Second quarter 2018 GAAP earnings

$26,537  $22,724  $11,770  $33,360  $578  $(3,122) $91,847 
              

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform790    400    159  2,651  4,000 
Unrealized (gain) loss on hedge ineffectiveness(335)           (335)
Tax impact of unrealized gain) loss on hedge ineffectiveness82            82 

Second quarter 2018 adjusted operating results

27,074  22,724  12,170  33,360  737  (471) 95,594 
              

Drivers of adjusted operating results**

             
              

Upstream Revenues

             
Higher (lower) natural gas production6,261            6,261 
Higher (lower) crude oil production(4,359)           (4,359)
Higher (lower) realized natural gas prices, after hedging2,018            2,018 
Higher (lower) realized crude oil prices, after hedging1,154            1,154 
              

Midstream and All Other Revenues

             
Higher (lower) operating revenues  (3,336) 1,234      (699) (2,801)
              

Downstream Margins***

             
Impact of higher usage and weather      618      618 
System modernization tracker revenues      680      680 
Lower (higher) refund provision on tax rate change      (2,827)     (2,827)
Regulatory true-up adjustments      886      886 
              

Operating Expenses

             
Lower (higher) lease operating and transportation expenses(1,610)           (1,610)
Lower (higher) operating expenses  (2,359) (953) (1,255)     (4,567)
Lower (higher) depreciation / depletion(2,946)           (2,946)
              

Other Income (Expense)

             
(Higher) lower other deductions      1,746      1,746 
(Higher) lower interest expense(127) 283  123  448  (6) 276  997 
              

Income Taxes

             
Impact of tax rate reduction due to 2017 Tax Reform1,010  822  564  1,535  23  22  3,976 
Lower (higher) income tax expense / effective tax rate(1,910) 81  (4) (44) 11  (10) (1,876)
              
All other / rounding634  (466) (444) 442  (221) 6  (49)

Second quarter 2019 adjusted operating results

27,199  17,749  12,690  35,589  544  (876) 92,895 
              

Items impacting comparability:

             
Unrealized gain (loss) on hedge ineffectiveness(6,742)           (6,742)
Tax impact of unrealized gain (loss) on hedge ineffectiveness1,416            1,416 
Unrealized gain (loss) on other investments          3,831  3,831 
Tax impact of unrealized gain (loss) on other investments          (805) (805)

Second quarter 2019 GAAP earnings

$21,873  $17,749  $12,690  $35,589  $544  $2,150  $90,595 
              
* Amounts do not reflect intercompany eliminations             
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE

QUARTER ENDED MARCH 31, 2019

(Unaudited)

              
 

Upstream

 

Midstream

Businesses

 

Downstream

Businesses

    
              
 Exploration & Pipeline &     Energy Corporate /  
 Production Storage Gathering Utility Marketing All Other Consolidated*
              

Second quarter 2018 GAAP earnings per share

$0.31  $0.26  $0.14  $0.39  $0.01  $(0.05) $1.06 

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform0.01    0.01      0.03  0.05 
Unrealized (gain) loss on hedge ineffectiveness             
Tax impact of unrealized (gain) loss on hedge ineffectiveness             
Rounding(0.01)   (0.01)     0.02   

Second quarter 2018 adjusted operating results per share

0.31  0.26  0.14  0.39  0.01    1.11 
              

Drivers of adjusted operating results**

             
              

Upstream Revenues

             
Higher (lower) natural gas production0.07            0.07 
Higher (lower) crude oil production(0.05)           (0.05)
Higher (lower) realized natural gas prices, after hedging0.02            0.02 
Higher (lower) realized crude oil prices, after hedging0.01            0.01 
              

Midstream and All Other Revenues

             
Higher (lower) operating revenues  (0.04) 0.01      (0.01) (0.04)
              

Downstream Margins***

             
Impact of higher usage and weather      0.01      0.01 
System modernization tracker revenues      0.01      0.01 
Lower (higher) refund provision on tax rate change      (0.03)     (0.03)
Regulatory true-up adjustments      0.01      0.01 
              

Operating Expenses

             
Lower (higher) lease operating and transportation expenses(0.02)           (0.02)
Lower (higher) operating expenses  (0.03) (0.01) (0.01)     (0.05)
Lower (higher) depreciation / depletion(0.03)           (0.03)
              

Other Income (Expense)

             
(Higher) lower other deductions      0.02      0.02 
(Higher) lower interest expense      0.01      0.01 
              

Income Taxes

             
Impact of tax rate reduction due to 2017 Tax Reform0.01  0.01  0.01  0.02      0.05 
Lower (higher) income tax expense / effective tax rate(0.02)           (0.02)
              
All other / rounding0.01      (0.02)     (0.01)

Second quarter 2019 adjusted operating results per share

0.31  0.20  0.15  0.41  0.01  (0.01) 1.07 
              

Items impacting comparability:

             
Unrealized gain (loss) on hedge ineffectiveness(0.08)           (0.08)
Tax impact of unrealized gain (loss) on hedge ineffectiveness0.02            0.02 
Unrealized gain (loss) on other investments          0.04  0.04 
Tax impact of unrealized gain (loss) on other investments          (0.01) (0.01)

Second quarter 2019 GAAP earnings per share

$0.25  $0.20  $0.15  $0.41  $0.01  $0.02  $1.04 
              
* Amounts do not reflect intercompany eliminations             
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS

SIX MONTHS ENDED MARCH 31, 2019

(Unaudited)

              
 

Upstream

 

Midstream

Businesses

 

Downstream

Businesses

    
              
 Exploration & Pipeline &     Energy Corporate /  
(Thousands of Dollars)Production Storage Gathering Utility Marketing All Other Consolidated*
              

Six months ended March 31, 2018 GAAP earnings

$133,235  $61,186  $57,169  $54,353  $1,624  $(17,066) $290,501 
              

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform(76,510) (14,100) (34,500)   359  17,751  (107,000)
Unrealized (gain) loss on hedge ineffectiveness98            98 
Tax impact of unrealized (gain) loss on hedge ineffectiveness(24)           (24)

Six months ended March 31, 2018 adjusted operating results

56,799  47,086  22,669  54,353  1,983  685  183,575 
              

Drivers of adjusted operating results**

             
              

Upstream Revenues

             
Higher (lower) natural gas production25,603            25,603 
Higher (lower) crude oil production(8,915)           (8,915)
Higher (lower) realized natural gas prices, after hedging(989)           (989)
Higher (lower) realized crude oil prices, after hedging1,973            1,973 
              

Midstream and All Other Revenues

             
Higher (lower) operating revenues  (1,997) 5,655      (764) 2,894 
              

Downstream Margins***

             
Impact of higher usage and weather      2,220      2,220 
System modernization tracker revenues      1,568      1,568 
Lower (higher) refund provision on tax rate change      (2,414)     (2,414)
Higher (lower) marketing margins        (2,110)   (2,110)
              

Operating Expenses

             
Lower (higher) lease operating and transportation expenses(3,811)           (3,811)
Lower (higher) operating expenses(1,328) (5,350) (1,502) (880)     (9,060)
Lower (higher) property, franchise and other taxes(1,684) (539)         (2,223)
Lower (higher) depreciation / depletion(8,439) (735) (782)       (9,956)
              

Other Income (Expense)

             
(Higher) lower other deductions      2,103      2,103 
(Higher) lower interest expense32  729  94  1,161  (1) 550  2,565 
              

Income Taxes

             
Impact of tax rate reduction due to 2017 Tax Reform2,603  1,618  1,150  2,542  (7) (196) 7,710 
Lower (higher) income tax expense / effective tax rate(3,094) 1,715  (604) (75) 172  97  (1,789)
              
All other / rounding534  324  (308) 659  8  270  1,487 

Six months ended March 31, 2019 adjusted operating results

59,284  42,851  26,372  61,237  45  642  190,431 
              

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform990    500    198  3,312  5,000 
Unrealized gain (loss) on hedge ineffectiveness(237)           (237)
Tax impact of unrealized gain (loss) on hedge ineffectiveness50            50 
Unrealized gain (loss) on other investments          (2,516) (2,516)
Tax impact of unrealized gain (loss) on other investments          528  528 

Six months ended March 31, 2019 GAAP earnings

$60,087  $42,851  $26,872  $61,237  $243  $1,966  $193,256 
              
* Amounts do not reflect intercompany eliminations             
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.

NATIONAL FUEL GAS COMPANY

RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE

SIX MONTHS ENDED MARCH 31, 2019

(Unaudited)

              
 

Upstream

 

Midstream

Businesses

 

Downstream

Businesses

    
              
 Exploration & Pipeline &     Energy Corporate /  
 Production Storage Gathering Utility Marketing All Other Consolidated*

Six months ended March 31, 2018 GAAP earnings per share

$1.54  $0.71  $0.66  $0.63  $0.02  $(0.19) $3.37 

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform(0.89) (0.16) (0.40)     0.21  (1.24)
Unrealized (gain) loss on hedge ineffectiveness             
Tax impact of unrealized (gain) loss on hedge ineffectiveness             
Rounding0.01          (0.01)  

Six months ended March 31, 2018 adjusted operating results per share

0.66  0.55  0.26  0.63  0.02  0.01  2.13 
              

Drivers of adjusted operating results**

             
              

Upstream Revenues

             
Higher (lower) natural gas production0.30            0.30 
Higher (lower) crude oil production(0.10)           (0.10)
Higher (lower) realized natural gas prices, after hedging(0.01)           (0.01)
Higher (lower) realized crude oil prices, after hedging0.02            0.02 
              

Midstream and All Other Revenues

             
Higher (lower) operating revenues  (0.02) 0.07      (0.01) 0.04 
              

Downstream Margins***

             
Impact of higher usage and weather      0.03      0.03 
System modernization tracker revenues      0.02      0.02 
Lower (higher) refund provision on tax rate change      (0.03)     (0.03)
Higher (lower) marketing margins        (0.02)   (0.02)
              

Operating Expenses

             
Lower (higher) lease operating and transportation expenses(0.04)           (0.04)
Lower (higher) operating expenses(0.02) (0.06) (0.02) (0.01)     (0.11)
Lower (higher) property, franchise and other taxes(0.02) (0.01)         (0.03)
Lower (higher) depreciation / depletion(0.10) (0.01) (0.01)       (0.12)
              

Other Income (Expense)

             
(Higher) lower other deductions      0.02      0.02 
(Higher) lower interest expense  0.01    0.01    0.01  0.03 
              

Income Taxes

             
Impact of tax rate reduction due to 2017 Tax Reform0.03  0.02  0.01  0.03      0.09 
Lower (higher) income tax expense / effective tax rate(0.04) 0.02  (0.01)       (0.03)
              
All other / rounding  (0.01)   0.01    0.01  0.01 

Six months ended March 31, 2019 adjusted operating results per share

0.68  0.49  0.30  0.71    0.02  2.20 
              

Items impacting comparability:

             
Remeasurement of deferred taxes under 2017 Tax Reform0.01    0.01      0.04  0.06 
Unrealized gain (loss) on hedge ineffectiveness             
Tax impact of unrealized gain (loss) on hedge ineffectiveness             
Unrealized gain (loss) on other investments          (0.03) (0.03)
Tax impact of unrealized gain (loss) on other investments          0.01  0.01 
Rounding          (0.01) (0.01)

Six months ended March 31, 2019 GAAP earnings per share

$0.69  $0.49  $0.31  $0.71  $  $0.03  $2.23 
              
* Amounts do not reflect intercompany eliminations             
** Operating results have been calculated using the 24.5% federal statutory rate effective for the 2018 fiscal year. The impact of the change to a 21% federal statutory rate for the 2019 fiscal year is broken out separately under the caption "Income Taxes".
*** Downstream margin defined as operating revenues less purchased gas expense.

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

         
(Thousands of Dollars, except per share amounts)        
 Three Months Ended Six Months Ended 
 March 31, March 31, 
 (Unaudited) (Unaudited) 

SUMMARY OF OPERATIONS

2019 2018 2019 2018 
Operating Revenues:        
Utility and Energy Marketing Revenues$357,654  $339,422  $629,747  $565,147  
Exploration and Production and Other Revenues146,467  147,868  310,403  288,318  
Pipeline and Storage and Gathering Revenues48,423  53,615  102,641  107,096  
 552,544  540,905  1,042,791  960,561  
Operating Expenses:        
Purchased Gas195,037  176,608  333,697  270,642  
Operation and Maintenance:        
  Utility and Energy Marketing48,559  46,708  92,475  90,789  
  Exploration and Production and Other40,141  39,127  72,936  74,209  
  Pipeline and Storage and Gathering27,249  22,916  52,182  43,227  
Property, Franchise and Other Taxes22,535  22,802  46,540  43,650  
Depreciation, Depletion and Amortization65,664  61,155  129,918  116,985  
 399,185  369,316  727,748  639,502  
         
Operating Income153,359  171,589  315,043  321,059  
         
Other Income (Expense):        
Other Income (Deductions)(5,919) (13,092) (15,521) (16,594) 
Interest Expense on Long-Term Debt(25,273) (27,148) (50,713) (55,235) 
Other Interest Expense(1,787) (1,233) (2,860) (1,736) 
         
Income Before Income Taxes120,380  130,116  245,949  247,494  
         
Income Tax Expense (Benefit)29,785  38,269  52,693  (43,007) 
         
Net Income Available for Common Stock$90,595  $91,847  $193,256  $290,501  
         
Earnings Per Common Share        
Basic$1.05  $1.07  $2.24  $3.39  
Diluted$1.04  $1.06  $2.23  $3.37  
         

Weighted Average Common Shares:

        
Used in Basic Calculation86,290,047 85,809,233 86,159,932 85,718,779 
Used in Diluted Calculation86,767,673 86,323,636 86,738,809 86,318,892 

NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
  
 March 31, September 30,

(Thousands of Dollars)

 2019  2018
    

ASSETS

   
Property, Plant and Equipment$10,788,894  $10,439,839 
Less - Accumulated Depreciation, Depletion and Amortization 5,573,020   5,462,696 
Net Property, Plant and Equipment 5,215,874   4,977,143 
    
Current Assets:   
Cash and Temporary Cash Investments 100,643   229,606 
Hedging Collateral Deposits 1,983   3,441 
Receivables - Net 235,586   141,498 
Unbilled Revenue 60,196   24,182 
Gas Stored Underground 6,848   37,813 
Materials and Supplies - at average cost 37,695   35,823 
Unrecovered Purchased Gas Costs 5,760   4,204 
Other Current Assets 57,586   68,024 
Total Current Assets 506,297   544,591 
    
Other Assets:   
Recoverable Future Taxes 113,441   115,460 
Unamortized Debt Expense 14,922   15,975 
Other Regulatory Assets 108,193   112,918 
Deferred Charges 39,634   40,025 
Other Investments 135,022   132,545 
Goodwill 5,476   5,476 
Prepaid Post-Retirement Benefit Costs 86,802   82,733 
Fair Value of Derivative Financial Instruments 11,130   9,518 
Other 42,184   102 
Total Other Assets 556,804   514,752 
Total Assets$6,278,975  $6,036,486 
    

CAPITALIZATION AND LIABILITIES

   
Capitalization:   
Comprehensive Shareholders' Equity   
Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and   
Outstanding - 86,300,675 Shares and 85,956,814 Shares, Respectively$86,301  $85,957 
Paid in Capital 821,837   820,223 
Earnings Reinvested in the Business 1,236,657   1,098,900 
Accumulated Other Comprehensive Loss (54,286)  (67,750)
Total Comprehensive Shareholders' Equity 2,090,509   1,937,330 
Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,132,488   2,131,365 
Total Capitalization 4,222,997   4,068,695 
    
Current and Accrued Liabilities:   
Notes Payable to Banks and Commercial Paper     
Current Portion of Long-Term Debt     
Accounts Payable 141,851   160,031 
Amounts Payable to Customers 15,463   3,394 
Dividends Payable 36,678   36,532 
Interest Payable on Long-Term Debt 18,508   19,062 
Customer Advances 433   13,609 
Customer Security Deposits 18,519   25,703 
Other Accruals and Current Liabilities 195,797   132,693 
Fair Value of Derivative Financial Instruments 5,749   49,036 
Total Current and Accrued Liabilities 432,998   440,060 
    
Deferred Credits:   
Deferred Income Taxes 618,850   512,686 
Taxes Refundable to Customers 365,380   370,628 
Cost of Removal Regulatory Liability 215,864   212,311 
Other Regulatory Liabilities 156,722   146,743 
Pension and Other Post-Retirement Liabilities 49,213   66,103 
Asset Retirement Obligations 104,138   108,235 
Other Deferred Credits 112,813   111,025 
Total Deferred Credits 1,622,980   1,527,731 
Commitments and Contingencies     
Total Capitalization and Liabilities$6,278,975  $6,036,486 

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

  Six Months Ended
  March 31,

(Thousands of Dollars)

 2019 2018
     
Operating Activities:    
Net Income Available for Common Stock $193,256  $290,501 
Adjustments to Reconcile Net Income to Net Cash

Provided by Operating Activities:

    
Depreciation, Depletion and Amortization 129,918  116,985 
Deferred Income Taxes 90,468  (62,459)
Stock-Based Compensation 10,731  7,862 
Other 7,997  8,052 
Change in:    
Receivables and Unbilled Revenue (130,377) (123,954)
Gas Stored Underground and Materials and Supplies 29,093  28,004 
Unrecovered Purchased Gas Costs (1,556) 4,197 
Other Current Assets 10,438  (8,819)
Accounts Payable 10,226  10,838 
Amounts Payable to Customers 12,069  12,083 
Customer Advances (13,176) (15,547)
Customer Security Deposits (7,184) (1,399)
Other Accruals and Current Liabilities 48,028  37,646 
Other Assets (38,686) (9,541)
Other Liabilities (10,410) (5,767)
Net Cash Provided by Operating Activities $340,835  $288,682 
     
Investing Activities:    
Capital Expenditures $(386,579) $(261,720)
Net Proceeds from Sale of Oil and Gas Producing Properties   17,310 
Other (2,616) 5,355 
Net Cash Used in Investing Activities $(389,195) $(239,055)
     
Financing Activities:    
Reduction of Long-Term Debt $  $(307,047)
Dividends Paid on Common Stock (73,197) (71,091)
Net Proceeds from Issuance (Repurchase) of Common Stock (8,864) 2,891 
Net Cash Used in Financing Activities $(82,061) $(375,247)
     
Net Decrease in Cash, Cash Equivalents, and Restricted Cash (130,421) (325,620)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 233,047  557,271 
Cash, Cash Equivalents, and Restricted Cash at March 31 $102,626  $231,651 

          
          

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

          

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

          

UPSTREAM BUSINESS

          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,

EXPLORATION AND PRODUCTION SEGMENT

2019 2018 Variance 20192018Variance
Total Operating Revenues$146,102  $146,411  $(309) $308,978 $285,552 $23,426 
          
Operating Expenses:         
Operation and Maintenance:         
General and Administrative Expense17,113  16,748  365  32,312 30,350 1,962 
Lease Operating and Transportation Expense45,941  43,808  2,133  88,503 83,455 5,048 
All Other Operation and Maintenance Expense2,900  2,919  (19) 5,252 5,454 (202)
Property, Franchise and Other Taxes3,310  3,873  (563) 9,673 7,443 2,230 
Depreciation, Depletion and Amortization35,888  31,986  3,902  70,588 59,411 11,177 
 105,152  99,334  5,818  206,328 186,113 20,215 
          
Operating Income40,950  47,077 (6,127) 102,650 99,4393,211 
          
Other Income (Expense):         
Other Income (Deductions)275  12  263  554 15 539 
Other Interest Expense(13,548) (13,380) (168) (26,711)(26,753)42 
          
Income Before Income Taxes27,677  33,709  (6,032) 76,493 72,701 3,792 
Income Tax Expense (Benefit)5,804  7,172  (1,368) 16,406 (60,534)76,940 
Net Income$21,873  $26,537  $(4,664) $60,087 $133,235 $(73,148)
          
Net Income Per Share (Diluted)$0.25  $0.31  $(0.06) $0.69 $1.54 $(0.85)
          

          

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

          

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

          

MIDSTREAM BUSINESSES

          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,

PIPELINE AND STORAGE SEGMENT

2019 2018 Variance 20192018Variance
Revenues from External Customers$48,421  $53,714  $(5,293) $102,639 $107,025 $(4,386)
Intersegment Revenues23,918  23,044  874  46,769 45,028 1,741 
Total Operating Revenues72,339  76,758  (4,419) 149,408 152,053 (2,645)
          
Operating Expenses:         
Purchased Gas510  55  455  813 161 652 
Operation and Maintenance22,907  19,782  3,125  44,540 37,454 7,086 
Property, Franchise and Other Taxes7,641  7,135  506  14,949 14,235 714 
Depreciation, Depletion and Amortization11,293  10,838  455  22,407 21,434 973 
 42,351  37,810  4,541  82,709 73,284 9,425 
          
Operating Income29,988  38,948  (8,960) 66,699 78,769 (12,070)
          
Other Income (Expense):         
Other Income (Deductions)1,973  1,173  800  3,899 2,819 1,080 
Interest Expense(7,500) (7,875) 375  (14,786)(15,752)966 
          
Income Before Income Taxes24,461  32,246  (7,785) 55,812 65,836 (10,024)
Income Tax Expense6,712  9,522  (2,810) 12,961 4,650 8,311 
Net Income$17,749  $22,724  $(4,975) $42,851 $61,186 $(18,335)
          
Net Income Per Share (Diluted)$0.20  $0.26  $(0.06) $0.49 $0.71 $(0.22)
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,

GATHERING SEGMENT

2019 2018 Variance 20192018Variance
Revenues from External Customers$2  $(99) $101  $2 $71 $(69)
Intersegment Revenues29,366  27,832  1,534  59,056 51,497 7,559 
Total Operating Revenues29,368  27,733  1,635  59,058 51,568 7,490 
          
Operating Expenses:         
Operation and Maintenance4,752  3,490  1,262  8,464 6,474 1,990 
Property, Franchise and Other Taxes18  23  (5) 48 61 (13)
Depreciation, Depletion and Amortization4,673  4,227  446  9,351 8,315 1,036 
 9,443  7,740  1,703  17,863 14,850 3,013 
          
Operating Income19,925  19,993  (68) 41,195 36,718 4,477 
          
Other Income (Expense):         
Other Income (Deductions)189  337  (148) 232 651 (419)
Interest Expense(2,345) (2,508) 163  (4,723)(4,847)124 
          
Income Before Income Taxes17,769  17,822  (53) 36,704 32,522 4,182 
Income Tax Expense (Benefit)5,079  6,052  (973) 9,832 (24,647)34,479 
Net Income$12,690  $11,770  $920  $26,872 $57,169 $(30,297)
          
Net Income Per Share (Diluted)$0.15  $0.14  $0.01  $0.31 $0.66 $(0.35)
          

          

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

          

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

          

DOWNSTREAM BUSINESSES

          
          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,

UTILITY SEGMENT

2019 2018 Variance 20192018Variance
Revenues from External Customers$298,636  $283,778  $14,858  $518,647 $470,867 $47,780 
Intersegment Revenues4,394  5,700  (1,306) 7,040 7,882 (842)
Total Operating Revenues303,030  289,478  13,552  525,687 478,749 46,938 
          
Operating Expenses:         
Purchased Gas165,235  151,493  13,742  277,115 233,418 43,697 
Operation and Maintenance47,795  45,885  1,910  90,950 89,203 1,747 
Property, Franchise and Other Taxes11,312  11,509  (197) 21,365 21,388 (23)
Depreciation, Depletion and Amortization13,365  13,340  25  26,656 26,665 (9)
 237,707  222,227  15,480  416,086 370,674 45,412 
          
Operating Income65,323  67,251  (1,928) 109,601 108,075 1,526 
          
Other Income (Expense):         
Other Income (Deductions)(11,618) (13,930) 2,312  (17,834)(20,620)2,786 
Interest Expense(6,263) (6,857) 594  (12,157)(13,695)1,538 
          
Income Before Income Taxes47,442  46,464  978  79,610 73,760 5,850 
Income Tax Expense11,853  13,104  (1,251) 18,373 19,407 (1,034)
Net Income$35,589  $33,360  $2,229  $61,237 $54,353 $6,884 
          
Net Income Per Share (Diluted)$0.41  $0.39  $0.02  $0.71 $0.63 $0.08 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,

ENERGY MARKETING SEGMENT

2019 2018 Variance 20192018Variance
Revenues from External Customers$59,018  $55,644  $3,374  $111,100 $94,280 $16,820 
Intersegment Revenues43  (51) 94  375 76 299 
Total Operating Revenues59,061  55,593  3,468  111,475 94,356 17,119 
          
Operating Expenses:         
Purchased Gas56,820  52,980  3,840  108,337 88,423 19,914 
Operation and Maintenance1,621  1,565  56  3,239 3,079 160 
Depreciation, Depletion and Amortization71  68  3  141 138 3 
 58,512  54,613  3,899  111,717 91,640 20,077 
          
Operating Income (Loss)549  980  (431) (242)2,716 (2,958)
          
Other Income (Expense):         
Other Income (Deductions)198  59  139  245 72 173 
Interest Expense(8)   (8) (13)(12)(1)
          
Income (Loss) Before Income Taxes739  1,039  (300) (10)2,776 (2,786)
Income Tax Expense (Benefit)195  461  (266) (253)1,152 (1,405)
Net Income$544  $578  $(34) $243 $1,624 $(1,381)
          
Net Income Per Share (Diluted)$0.01  $0.01  $  $ $0.02 $(0.02)
          

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

          

SEGMENT OPERATING RESULTS AND STATISTICS

(UNAUDITED)

          
 Three Months Ended Six Months Ended
(Thousands of Dollars, except per share amounts)March 31, March 31,

ALL OTHER

2019 2018 Variance 20192018Variance
Total Operating Revenues$310  $1,232  $(922) $1,316 $2,328 $(1,012)
Operating Expenses:         
Operation and Maintenance323  357  (34) 583 671 (88)
Property, Franchise and Other Taxes134  145  (11) 270 288 (18)
Depreciation, Depletion and Amortization183  506  (323) 395 645 (250)
 640  1,008  (368) 1,248 1,604 (356)
          
Operating Income (Loss)(330) 224  (554) 68 724 (656)
          
Other Income (Expense):         
Other Income (Deductions)151  81  70  288 143 145 
          
Income (Loss) Before Income Taxes(179) 305  (484) 356 867 (511)
Income Tax Expense (Benefit)(51) 98  (149) 100 1,378 (1,278)
Net Income (Loss)$(128) $207  $(335) $256 $(511)$767 
          
Net Income (Loss) Per Share (Diluted)$  $  $  $0.01 $ $0.01 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,

CORPORATE

2019 2018 Variance 20192018Variance
Revenues from External Customers$55  $225  $(170) $109 $438 $(329)
Intersegment Revenues1,165  999  166  2,329 1,999 330 
Total Operating Revenues1,220  1,224  (4) 2,438 2,437 1 
Operating Expenses:         
Operation and Maintenance3,955  3,801  154  6,751 7,207 (456)
Property, Franchise and Other Taxes120  117  3  235 235  
Depreciation, Depletion and Amortization191  190  1  380 377 3 
 4,266  4,108  158  7,366 7,819 (453)
          
Operating Loss(3,046) (2,884) (162) (4,928)(5,382)454 
          
Other Income (Expense):         
Other Income (Deductions)32,114  30,122  1,992  54,992 62,591 (7,599)
Interest Expense on Long-Term Debt(25,273) (27,148) 1,875  (50,713)(55,235)4,522 
Other Interest Expense(1,324) (1,559) 235  (2,367)(2,942)575 
          
Income (Loss) before Income Taxes2,471  (1,469) 3,940  (3,016)(968)(2,048)
Income Tax Expense (Benefit)193  1,860  (1,667) (4,726)15,587 (20,313)
Net Income (Loss)$2,278  $(3,329) $5,607  $1,710 $(16,555)$18,265 
          
Net Income (Loss) Per Share (Diluted)$0.02  $(0.05) $0.07  $0.02 $(0.19)$0.21 
          
          
 Three Months Ended Six Months Ended
 March 31, March 31,

INTERSEGMENT ELIMINATIONS

2019 2018 Variance 20192018Variance
Intersegment Revenues$(58,886) $(57,524) $(1,362) $(115,569)$(106,482)$(9,087)
Operating Expenses:         
Purchased Gas(27,528) (27,920) 392  (52,568)(51,360)(1,208)
Operation and Maintenance(31,358) (29,604) (1,754) (63,001)(55,122)(7,879)
 (58,886) (57,524) (1,362) (115,569)(106,482)(9,087)
          
Operating Income         
          
Other Income (Expense):         
Other Income (Deductions)(29,201) (30,946) 1,745  (57,897)(62,265)4,368 
Interest Expense29,201  30,946  (1,745) 57,897 62,265 (4,368)
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
 2019 2018 (Decrease) 2019 2018 (Decrease)
            

Capital Expenditures:

           
Exploration and Production$142,571 

(1)

$84,559 

(3)

$58,012  $262,786 

(1)(2)

$159,285 

(3)(4)

$103,501 
Pipeline and Storage22,674 

(1)

15,167 

(3)

7,507  52,638 

(1)(2)

37,440 

(3)(4)

15,198 
Gathering12,680 

(1)

19,352 

(3)

(6,672) 21,470 

(1)(2)

32,283 

(3)(4)

(10,813)
Utility19,735 

(1)

15,755 

(3)

3,980  35,657 

(1)(2)

32,290 

(3)(4)

3,367 
Energy Marketing22  4  18  41  22  19 
Total Reportable Segments197,682  134,837  62,845  372,592  261,320  111,272 
All Other        1  (1)
Corporate85  15  70  103  44  59 
Eliminations  (19,922) 19,922    (19,922) 19,922 
Total Capital Expenditures$197,767  $114,930  $82,837  $372,695  $241,443  $131,252 

(1)       Capital expenditures for the quarter and six months ended March 31, 2019, include accounts payable and accrued liabilities related to capital expenditures of $53.4 million, $10.7 million, $7.4 million, and $3.4 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, 2019, since they represent non-cash investing activities at that date.

(2)       Capital expenditures for the six months ended March 31, 2019, exclude capital expenditures of $51.3 million, $21.9 million, $6.1 million and $9.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2018 and paid during the six months ended March 31, 2019.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2018, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2019.

(3)       Capital expenditures for the quarter and six months ended March 31, 2018, include accounts payable and accrued liabilities related to capital expenditures of $38.8 million, $9.0 million, $1.6 million, and $2.5 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, 2018, since they represent non-cash investing activities at that date.

(4)       Capital expenditures for the six months ended March 31, 2018, exclude capital expenditures of $36.5 million, $25.1 million, $3.9 million and $6.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively.  These amounts were in accounts payable and accrued liabilities at September 30, 2017 and paid during the six months ended March 31, 2018.  These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2017, since they represented non-cash investing activities at that date.  These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2018.

          

DEGREE DAYS

         
          
       Percent Colder
       (Warmer) Than:

Three Months Ended March 31

Normal 2019 2018   Normal (1) Last Year (1)
          
Buffalo, NY3,290 3,372 3,208 2.5 5.1
Erie, PA3,108 3,096 3,075 (0.4) 0.7
          

Six Months Ended March 31

         
          
Buffalo, NY5,543 5,697 5,435 2.8 4.8
Erie, PA5,152 5,126 5,104 (0.5) 0.4
          

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

             
             

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

             

EXPLORATION AND PRODUCTION INFORMATION

             
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
             

Gas Production/Prices:

            
Production (MMcf)            
Appalachia 44,883  41,403  3,480  90,188  76,817  13,371 
West Coast 487  675  (188) 989  1,370  (381)
Total Production 45,370  42,078  3,292  91,177  78,187  12,990 
             
Average Prices (Per Mcf)            
Appalachia $2.65  $2.46  $0.19  $2.79  $2.41  $0.38 
West Coast 6.06  4.40  1.66  6.40  4.70  1.70 
Weighted Average 2.69  2.49  0.20  2.83  2.45  0.38 
Weighted Average after Hedging 2.58  2.52  0.06  2.60  2.61  (0.01)
             

Oil Production/Prices:

            
Production (Thousands of Barrels)            
Appalachia 1  1    2  2   
West Coast 563  662  (99) 1,134  1,334  (200)
Total Production 564  663  (99) 1,136  1,336  (200)
             
Average Prices (Per Barrel)            
Appalachia $47.54  $58.54  $(11.00) $55.93  $49.82  $6.11 
West Coast 61.85  65.39  (3.54) 63.79  61.61  2.18 
Weighted Average 61.82  65.39  (3.57) 63.78  61.60  2.18 
Weighted Average after Hedging 61.01  58.31  2.70  61.36  59.05  2.31 
             
Total Production (MMcfe) 48,754  46,056  2,698  97,993  86,203  11,790 
             

Selected Operating Performance Statistics:

            
General & Administrative Expense per Mcfe (1) $0.35  $0.36  $(0.01) $0.33  $0.35  $(0.02)
Lease Operating and Transportation Expense per Mcfe (1)(2) $0.94  $0.95  $(0.01) $0.90  $0.97  $(0.07)
Depreciation, Depletion & Amortization per Mcfe (1) $0.74  $0.69  $0.05  $0.72  $0.69  $0.03 
             

(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 $0.56 and $0.54 per Mcfe for the three months ended March 31, 2019 and March 31, 2018, respectively. Amounts include transportation expense of $0.55 and $0.54 per Mcfe for the six months ended March 31, 2019 and March 31, 2018, respectively.

 

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

       

EXPLORATION AND PRODUCTION INFORMATION

 

Hedging Summary for Remaining Six Months of Fiscal 2019

Volume

  

Average Hedge Price

Oil Swaps      
Brent 372,000 BBL $63.52 / BBL
NYMEX 534,000 BBL $53.42 / BBL

Total

 

906,000

 

BBL

 

$

57.57 / BBL

       
Gas Swaps      
NYMEX 40,080,000 MMBTU $2.93 / MMBTU
DAWN 3,600,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 37,356,436 MMBTU $2.61 / MMBTU

Total

 

81,036,436

 

MMBTU

 

$

2.78 / MMBTU

       

Hedging Summary for Fiscal 2020

 

Volume

  

Average Hedge Price

Oil Swaps      
Brent 1,128,000 BBL $64.26 / BBL
NYMEX 324,000 BBL $50.52 / BBL

Total

 

1,452,000

 

BBL

 

$

61.20 / BBL

       
Gas Swaps      
NYMEX 40,990,000 MMBTU $2.92 / MMBTU
DAWN 7,200,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 45,816,742 MMBTU $2.35 / MMBTU

Total

 

94,006,742

 

MMBTU

 

$

2.64 / MMBTU

       

Hedging Summary for Fiscal 2021

 

Volume

  

Average Hedge Price

Oil Swaps      
Brent 576,000 BBL $64.48 / BBL
NYMEX 156,000 BBL $51.00 / BBL

Total

 

732,000

 

BBL

 

$

61.61 / BBL

       
Gas Swaps      
NYMEX 6,790,000 MMBTU $2.95 / MMBTU
  DAWN 600,000 MMBTU $3.00 / MMBTU
Fixed Price Physical Sales 41,567,229 MMBTU $2.22 / MMBTU

Total

 

48,957,229

 

MMBTU

 

$

2.33 / MMBTU

       

Hedging Summary for Fiscal 2022

 

Volume

  

Average Hedge Price

Oil Swaps      
Brent 300,000 BBL $60.07 / BBL
NYMEX 156,000 BBL $51.00 / BBL

Total

 

456,000

 

BBL

 

$

56.97 / BBL

       
Fixed Price Physical Sales 40,683,056 MMBTU $2.23 / MMBTU
       

Hedging Summary for Fiscal 2023

 

Volume

  

Average Hedge Price

Fixed Price Physical Sales 37,225,983 MMBTU $2.26 / MMBTU
       

Hedging Summary for Fiscal 2024

 

Volume

  

Average Hedge Price

Fixed Price Physical Sales 21,074,815 MMBTU $2.25 / MMBTU
       

Hedging Summary for Fiscal 2025

 

Volume

  

Average Hedge Price

Fixed Price Physical Sales 2,293,200 MMBTU $2.18 / MMBTU

             

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

             
             

Pipeline & Storage Throughput - (millions of cubic feet - MMcf)

    
             
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Firm Transportation - Affiliated 50,967  47,551  3,416  86,668  82,392  4,276 
Firm Transportation - Non-Affiliated 148,653  152,128  (3,475) 304,855  323,989  (19,134)
Interruptible Transportation 750  1,165  (415) 1,665  2,046  (381)
  200,370  200,844  (474) 393,188  408,427  (15,239)
             

Gathering Volume - (MMcf)

            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Gathered Volume - Affiliated 54,157  51,374  2,783  108,845  94,536  14,309 
             
             

Utility Throughput - (MMcf)

            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Retail Sales:            
Residential Sales 30,906  28,568  2,338  50,686  46,415  4,271 
Commercial Sales 4,712  4,500  212  7,558  7,096  462 
Industrial Sales 284  287  (3) 488  431  57 
  35,902  33,355  2,547  58,732  53,942  4,790 
Off-System Sales   119  (119)   141  (141)
Transportation 28,928  29,624  (696) 51,198  51,051  147 
  64,830  63,098  1,732  109,930  105,134  4,796 
             

Energy Marketing Volume

            
  Three Months Ended Six Months Ended
  March 31, March 31,
      Increase     Increase
  2019 2018 (Decrease) 2019 2018 (Decrease)
Natural Gas (MMcf) 16,191  16,112  79  28,610  28,091  519 
             

NATIONAL FUEL GAS COMPANY

AND SUBSIDIARIES

NON-GAAP FINANCIAL MEASURES

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

Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability.  The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three and six months ended March 31, 2019 and 2018:

  Three Months Ended Six Months Ended
  March 31, March 31,

(in thousands except per share amounts)

 2019 2018 2019 2018

Reported GAAP Earnings

 $90,595  $91,847  $193,256  $290,501 

Items impacting comparability

        
Remeasurement of deferred income taxes under 2017 Tax Reform   4,000  (5,000) (107,000)
Unrealized (gain) loss on hedge ineffectiveness (E&P) 6,742  (335) 237  98 
Tax impact of unrealized (gain) loss on hedge ineffectiveness (1,416) 82  (50) (24)
Unrealized (gain) loss on other investments (Corporate/All Other) (3,831)   2,516   
Tax impact of unrealized (gain) loss on other investments 805    (528)  

Adjusted Operating Results

 $92,895  $95,594  $190,431  $183,575 
         

Reported GAAP Earnings per share

 $1.04  $1.06  $2.23  $3.37 

Items impacting comparability

        
Remeasurement of deferred income taxes under 2017 Tax Reform   0.05  (0.06) (1.24)
Unrealized (gain) loss on hedge ineffectiveness (E&P) 0.08       
Tax impact of unrealized (gain) loss on hedge ineffectiveness (0.02)      
Unrealized (gain) loss on other investments (Corporate/All Other) (0.04)   0.03   
Tax impact of unrealized (gain) loss on other investments 0.01    (0.01)  
Rounding     0.01   

Adjusted Operating Results per share

 $1.07  $1.11  $2.20  $2.13 
                 

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, 2019 and 2018:

  Three Months Ended Six Months Ended
  March 31, March 31,
  2019 2018 2019 2018

(in thousands)

        

Reported GAAP Earnings

 $90,595  $91,847  $193,256  $290,501 
Depreciation, Depletion and Amortization 65,664  61,155  129,918  116,985 
Other (Income) Deductions 5,919  13,092  15,521  16,594 
Interest Expense 27,060  28,381  53,573  56,971 
Income Taxes 29,785  38,269  52,693  (43,007)
Unrealized (Gain) Loss on Hedge Ineffectiveness 6,742  (335) 237  98 

Adjusted EBITDA

 $225,765  $232,409  $445,198  $438,142 
         

Adjusted EBITDA by Segment

        
Pipeline and Storage Adjusted EBITDA $41,281  $49,786  $89,106  $100,203 
Gathering Adjusted EBITDA 24,598  24,220  50,546  45,033 
Total Midstream Businesses Adjusted EBITDA 65,879  74,006  139,652  145,236 
Exploration and Production Adjusted EBITDA 83,580  78,728  173,475  158,948 
Utility Adjusted EBITDA 78,688  80,591  136,257  134,740 
Energy Marketing Adjusted EBITDA 620  1,048  (101) 2,854 
Corporate and All Other Adjusted EBITDA (3,002) (1,964) (4,085) (3,636)

Total Adjusted EBITDA

 $225,765  $232,409  $445,198  $438,142 
                 

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)

 2019 2018 2019 2018

Exploration and Production Segment

        
Reported GAAP Earnings $21,873  $26,537  $60,087  $133,235 
Depreciation, Depletion and Amortization 35,888  31,986  70,588  59,411 
Other (Income) Deductions (275) (12) (554) (15)
Interest Expense 13,548  13,380  26,711  26,753 
Income Taxes 5,804  7,172  16,406  (60,534)
Unrealized (Gain) Loss on Hedge Ineffectiveness 6,742  (335) 237  98 
Adjusted EBITDA $83,580  $78,728  $173,475  $158,948 
         

Pipeline and Storage Segment

        
Reported GAAP Earnings $17,749  $22,724  $42,851  $61,186 
Depreciation, Depletion and Amortization 11,293  10,838  22,407  21,434 
Other (Income) Deductions (1,973) (1,173) (3,899) (2,819)
Interest Expense 7,500  7,875  14,786  15,752 
Income Taxes 6,712  9,522  12,961  4,650 
Adjusted EBITDA $41,281  $49,786  $89,106  $100,203 
         

Gathering Segment

        
Reported GAAP Earnings $12,690  $11,770  $26,872  $57,169 
Depreciation, Depletion and Amortization 4,673  4,227  9,351  8,315 
Other (Income) Deductions (189) (337) (232) (651)
Interest Expense 2,345  2,508  4,723  4,847 
Income Taxes 5,079  6,052  9,832  (24,647)
Adjusted EBITDA $24,598  $24,220  $50,546  $45,033 
         

Utility Segment

        
Reported GAAP Earnings $35,589  $33,360  $61,237  $54,353 
Depreciation, Depletion and Amortization 13,365  13,340  26,656  26,665 
Other (Income) Deductions 11,618  13,930  17,834  20,620 
Interest Expense 6,263  6,857  12,157  13,695 
Income Taxes 11,853  13,104  18,373  19,407 
Adjusted EBITDA $78,688  $80,591  $136,257  $134,740 
         

Energy Marketing Segment

        
Reported GAAP Earnings $544  $578  $243  $1,624 
Depreciation, Depletion and Amortization 71  68  141  138 
Other (Income) Deductions (198) (59) (245) (72)
Interest Expense 8    13  12 
Income Taxes 195  461  (253) 1,152 
Adjusted EBITDA $620  $1,048  $(101) $2,854 
         

Corporate and All Other

        
Reported GAAP Earnings $2,150  $(3,122) $1,966  $(17,066)
Depreciation, Depletion and Amortization 374  696  775  1,022 
Other (Income) Deductions (3,064) 743  2,617  (469)
Interest Expense (2,604) (2,239) (4,817) (4,088)
Income Taxes 142  1,958  (4,626) 16,965 
Adjusted EBITDA $(3,002) $(1,964) $(4,085) $(3,636)

Kenneth E. Webster

Investor Relations

716-857-7067

David P. Bauer

Treasurer

716-857-7318

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