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National Fuel Reports Third Quarter Fiscal 2024 Earnings and Announces Preliminary Guidance for Fiscal 2025
المصدر: Nasdaq GlobeNewswire / 31 يوليو 2024 16:45:48 America/New_York
WILLIAMSVILLE, N.Y., July 31, 2024 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the third quarter of its 2024 fiscal year and for the nine months ended June 30, 2024.
FISCAL 2024 THIRD QUARTER SUMMARY
- GAAP net loss of $54.2 million, or $0.59 per share, which includes a $145.0 million non-cash, after-tax impairment charge related to the carrying value of exploration and production properties, compared to GAAP net income of $92.6 million, or $1.00 per share, in the prior year.
- Adjusted operating results of $91.7 million, or $0.99 per share, compared to $93.4 million, or $1.01 per share, in the prior year (see non-GAAP reconciliation on page 2).
- Pipeline and Storage segment net income increased $6.9 million, or 29%, from the prior year, primarily due to the resolution of the National Fuel Gas Supply Corporation (“Supply Corporation”) rate proceeding.
- Utility segment net income increased $2.5 million compared to the prior year, largely as a result of the continued impact of a rate increase in National Fuel Gas Distribution Corporation’s (“Distribution Corporation”) Pennsylvania service territory that went into effect August 2023.
- Exploration and Production segment, Seneca Resources Company, LLC (“Seneca”), produced 96.5 Bcf of natural gas, an increase of 2% from the prior year despite approximately 5.6 Bcf of price-related curtailments in the quarter.
- Realized natural gas prices of $2.28 per Mcf, an increase of $0.01 per Mcf from the prior year, as hedging gains more than offset a $0.20 per Mcf decrease in NYMEX prices from the prior year.
- Gathering segment net income increased by $0.8 million, or 3%, driven by continued growth in throughput related to Seneca’s development program.
- The Company continued to prioritize shareholder returns this quarter as the Board approved a 4% increase in the dividend, for an annual rate of $2.06 per share, while also purchasing approximately 527,000 shares year-to-date for $29 million at an average share price of $54.28, under our share repurchase program.
- The Company is narrowing its fiscal 2024 earnings guidance to a range of $5.00 to $5.10 per share, excluding items impacting comparability, and initiating its fiscal 2025 earnings guidance with a range of $5.75 to $6.25 per share, an increase of 19% from fiscal 2024, at the midpoint (see Guidance Summary on page 8). This increase in earnings growth supports the Company's average annual increase in earnings per share which is expected to exceed 10% over the next three years.
MANAGEMENT COMMENTS
David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel’s solid third quarter adjusted operating results were bolstered by increased earnings from our rate-regulated businesses and our disciplined hedging program, which mitigated a large portion of the potential impact of lower natural gas prices in our upstream business. Despite this near-term commodity price challenge, National Fuel’s long-term outlook for growing earnings and free cash flow remains strong.
“Our ongoing transition to Seneca’s Eastern Development Area (“EDA”) continues to exceed expectations and positions us well to see further improvements in capital efficiency. We are also seeing significant growth in our regulated businesses as a result of recent ratemaking activity and our ongoing modernization programs. Combining our solid operational execution across our assets with the strong long-term outlook for natural gas prices, we expect to deliver greater than 10% average annual growth in earnings per share over the next three years.
“Additionally, National Fuel’s strong outlook supports our commitment to returning an increasing amount of capital to shareholders through our long-standing and growing dividend, as well as our share repurchase program authorized earlier this year. This commitment to return cash to shareholders, along with our expected growth in earnings and free cash flow, and our continued focus on delivering strong returns on capital, provide an excellent foundation to drive significant value for shareholders.”
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS
Three Months Ended Nine Months Ended June 30, June 30, (in thousands except per share amounts) 2024 2023 2024 2023 Reported GAAP Earnings $ (54,158) $ 92,620 $ 245,134 $ 403,189 Items impacting comparability: Impairment of exploration and production properties (E&P) 200,696 — 200,696 — Tax impact of impairment of exploration and production properties (55,686) — (55,686) — Unrealized (gain) loss on derivative asset (E&P) 1,186 1,430 4,848 3,702 Tax impact of unrealized (gain) loss on derivative asset (325) (392) (1,330) (1,015) Unrealized (gain) loss on other investments (Corporate / All Other) 15 (355) (1,803) (1,632) Tax impact of unrealized (gain) loss on other investments (3) 74 379 343 Adjusted Operating Results $ 91,725 $ 93,377 $ 392,238 $ 404,587 Reported GAAP Earnings Per Share $ (0.59) $ 1.00 $ 2.65 $ 4.37 Items impacting comparability: Impairment of exploration and production properties, net of tax (E&P) 1.58 — 1.57 — Unrealized (gain) loss on derivative asset, net of tax (E&P) 0.01 0.01 0.04 0.03 Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) — — (0.02) (0.01) Rounding (0.01) — — (0.01) Adjusted Operating Results Per Share $ 0.99 $ 1.01 $ 4.24 $ 4.38 FISCAL 2024 GUIDANCE UPDATE
National Fuel is revising its fiscal 2024 earnings guidance to a range of $5.00 to $5.10 per share, an increase of 3% at the midpoint of the Company’s prior guidance range. This updated range, which excludes items impacting comparability, reflects the results of the third quarter along with updated assumptions for the remaining three months of the year.
The Company is now assuming NYMEX natural gas prices will average $2.40 per MMBtu for the remainder of fiscal 2024, an increase of $0.40 from the prior assumption. For guidance purposes, this updated natural gas price projection approximates the current NYMEX forward curve.
The Exploration and Production segment’s fiscal 2024 net production is now expected to be in the range of 390 to 400 Bcf, a decrease of 2.5 Bcf from previous guidance at the midpoint. This decrease is driven by the impact of approximately 5.6 Bcf of price-related curtailments due to low in-basin pricing during the third quarter, partially offset by better-than-expected results in the EDA. This guidance range does not incorporate any future price-related curtailments over the remainder of the fiscal year. Seneca currently has firm sales contracts in place for approximately 95% of its projected remaining fiscal 2024 natural gas production, significantly limiting its exposure to in-basin markets. Approximately 73% of expected remaining production is either matched by a financial hedge or was entered into at a fixed price.
Seneca is also reducing its fiscal 2024 capital guidance by $10 million at the top end of the range, or $5 million at the midpoint of guidance. This is the second consecutive quarter of capital reductions at Seneca as a result of operational efficiencies associated with the ongoing transition to the EDA and is indicative of the capital efficiency trends we are realizing as we head into fiscal 2025.
The Company’s other fiscal 2024 guidance assumptions remain largely unchanged and are detailed in the table on page 8.
INITIATION OF FISCAL 2025 PRELIMINARY GUIDANCE
In the non-regulated Exploration and Production and Gathering segments, the ongoing transition to the highly prolific EDA and lower activity compared to fiscal 2024 is anticipated to drive modest long-term production growth (0-5% annually) and reduce capital expenditures, furthering the trend of enhancing capital efficiency. Combining this with the outlook for higher natural gas prices, these segments are positioned to generate increasing earnings and free cash flow in fiscal 2025. In addition, recent and ongoing ratemaking activity, along with continued investments in system modernization, is expected to drive meaningful growth in rate base and earnings at the Company’s rate-regulated segments.
As a result of these factors, the Company is initiating preliminary earnings guidance for fiscal 2025 with a range of $5.75 to $6.25 per share, or $6.00 per share at the midpoint, an increase of 19% from the midpoint of the revised fiscal 2024 guidance range.
Seneca’s fiscal 2025 net production is expected to increase to a range of 400 to 420 Bcf, an increase of 4% versus fiscal 2024 at the midpoint of the guidance range. In addition, the Company is assuming NYMEX natural gas prices of $3.25 per MMBtu for the year, which will drive expected natural gas price realizations after hedging to increase by approximately $0.20 per Mcf from estimated fiscal 2024 realizations.
Overall, Seneca has firm sales contracts in place for approximately 88% of its expected fiscal 2025 natural gas production, significantly limiting its exposure to in-basin markets. Approximately 60% of expected production is supported by financial hedges or fixed price contracts, balancing downside protection with upside opportunity. To the extent that NYMEX increases $0.25 per MMBtu for the year, we would expect earnings per share to increase by approximately $0.35 per share, whereas a decrease to prices of $0.25 per MMBtu would reduce projected earnings per share by $0.30.
In the Company’s regulated segments, the impact of the recently settled Supply Corporation rate case is expected to drive continued revenue growth in the Pipeline and Storage segment, with revenues projected to be in a range of $415 million to $435 million, which at the midpoint represents a 4% increase from the fiscal 2024 guidance range. In addition, in the Utility segment, the Company is proceeding with the rate case filed in late 2023 in its New York jurisdiction. The impact of the expected base rate increase is expected to further contribute to growing margin and net income in this segment.
The Company’s consolidated capital expenditures in fiscal 2025 are expected to be in a range of $885 million to $970 million, which is largely in line with fiscal 2024 guidance.
Capital expenditures in the Company’s rate-regulated Pipeline and Storage and Utility segments, collectively, are expected to be in the range of $295 million to $335 million for fiscal 2025, an increase of 8% from fiscal 2024 at the midpoint. Most of this spending will be focused on modernization programs that further enhance the safety, reliability, and resiliency of the Company’s critical infrastructure, and contribute to the ongoing reduction in the Company’s emissions profile. Investments in these businesses, combined with ongoing ratemaking activity to timely recovery on these investments, provide for the ability to generate stable, predictable, value-accretive returns, and are an efficient means of deploying cash flow generated across the Company to the long-term benefit of shareholders.
The Company projects fiscal 2025 capital expenditures in its Exploration and Production and Gathering segments, collectively, to be in the range of $590 million to $635 million, a decrease of $25 million, or 4%, from fiscal 2024 at the midpoint. This capital program assumes a pace of development driven by operating a single, dedicated frac fleet throughout the year. Further, Seneca plans to operate one to two horizontal rigs and intermittently operate a top hole rig. In addition, the Gathering segment will continue its multi-year build out of key centralized infrastructure in the Tioga County region, which supports Seneca’s EDA development activity.
Additional details on the Company’s updated forecast assumptions and business segment guidance for fiscal 2024 and fiscal 2025 are outlined in the table on page 8.
DISCUSSION OF THIRD QUARTER RESULTS BY SEGMENT
The following earnings discussion of each operating segment for the quarter ended June 30, 2024 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the nine months ended June 30, 2024 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. Seneca explores for, develops and produces primarily natural gas reserves in Pennsylvania.
Three Months Ended June 30, (in thousands) 2024 2023 Variance GAAP Earnings $ (112,028) $ 43,329 $ (155,357) Impairment of exploration and production properties, net of tax 145,010 — 145,010 Unrealized (gain) loss on derivative asset, net of tax 861 1,038 (177) Adjusted Operating Results $ 33,843 $ 44,367 $ (10,524) Adjusted EBITDA $ 128,535 $ 134,236 $ (5,701) Seneca’s third quarter GAAP earnings decreased $155.4 million versus the prior year. This was primarily driven by a non-cash, pre-tax impairment charge of $200.7 million ($145.0 million after-tax) to write-down the carrying value of Seneca’s reserves under the full cost method of accounting. This method requires Seneca to perform a quarterly “ceiling test” comparing the present value of future net revenues from its reserves based on an unweighted arithmetic average of first day of the month pricing for each month within the 12-month period prior to the end of the reporting period (“the ceiling”) with the book value of those reserves at the balance sheet date. If the book value of the reserves exceeds the ceiling, a non-cash impairment charge must be recorded in order to reduce the book value of the reserves to the calculated ceiling. For purposes of the ceiling test, the 12-month average of first day of the month pricing for NYMEX natural gas for period ended June 30, 2024 was $2.32 per MMBtu. Seneca could potentially record non-cash impairments in future quarters depending on the commodity price environment.
Excluding this item, as well as the net impact of unrealized losses recorded quarter-over-quarter related to reductions in the fair value of contingent consideration received in connection with the June 2022 divestiture of Seneca’s California asset (see table above), Seneca's adjusted operating results decreased $10.5 million as higher natural gas production was more than offset by increases in per unit operating expenses.
During the third quarter, Seneca produced 96.5 Bcf of natural gas, an increase of 1.8 Bcf, or 2%, from the prior year, despite the impact of approximately 5.6 Bcf of price-related curtailments due to low in-basin pricing. The increase in production was largely due to production from new Marcellus and Utica wells in Seneca’s EDA.
Seneca’s average realized natural gas price, after the impact of hedging and transportation costs, was $2.28 per Mcf, an increase of $0.01 per Mcf from the prior year. Pre-hedging realized natural gas prices decreased 10% from the prior year; however, Seneca’s hedging portfolio, which experienced a gain of $0.78 per Mcf during the quarter, more than offset this impact.
On a per unit basis, lease operating and transportation expense (“LOE”) was $0.69 per Mcf, an increase of $0.04 per Mcf from the prior year. On an absolute basis, LOE increased $4.8 million primarily due to higher transportation and gathering costs as a result of increased production. LOE included $55.0 million for gathering and compression services from the Company’s Gathering segment to connect Seneca’s production to sales points along interstate pipelines.
General and administrative (“G&A”) expense was $0.19 per Mcf, an increase of $0.02 per Mcf from the prior year. On an absolute basis, Seneca’s G&A expense increased $2.3 million primarily due to an increase in personnel costs.
Depreciation, depletion and amortization (“DD&A”) expense was $0.71 per Mcf, an increase of $0.07 per Mcf from the prior year. Absolute DD&A expense increased $8.2 million due to a higher per unit DD&A rate and higher natural gas production. The higher per unit rate was driven by an increase in Seneca’s full cost pool due to a combination of higher capitalized costs and an increase in estimated future development costs related to proved undeveloped wells.
Seneca’s all other operating and maintenance (“O&M”) expense increased $2.2 million due primarily to an increase in an accrual for estimated plugging and abandonment expenses related to certain offshore Gulf of Mexico wells that were sold by Seneca to an operator that has since gone bankrupt. As a result, a portion of the cost of abandoning the wells is expected to revert back to Seneca.
Midstream Businesses
Pipeline and Storage Segment
The Pipeline and Storage segment’s operations are carried out by Supply Corporation and Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania.
Three Months Ended June 30, (in thousands) 2024 2023 Variance GAAP Earnings $ 30,690 $ 23,813 $ 6,877 Adjusted EBITDA $ 68,221 $ 57,636 $ 10,585 The Pipeline and Storage segment’s third quarter GAAP earnings increased $6.9 million versus the prior year primarily due to higher operating revenues, partly offset by higher O&M, DD&A, and interest expenses.
The increase in operating revenues of $13.0 million, or 14%, was primarily attributable to an increase in Supply Corporation’s transportation and storage rates effective February 1, 2024, in accordance with its rate case settlement.
O&M expense increased $1.9 million primarily due to an increase in personnel costs. The increase in DD&A expense of $0.7 million was attributable to higher average depreciable plant in service compared to the prior year, partially offset by a modest adjustment to depreciation expense related to the final regulatory approval of Supply Corporation’s rate case settlement. Interest expense increased $1.0 million primarily due to a higher average amount of net borrowings.
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 delivers Seneca and other non-affiliated Appalachian production to the interstate pipeline system.
Three Months Ended June 30, (in thousands) 2024 2023 Variance GAAP Earnings $ 24,979 $ 24,135 $ 844 Adjusted EBITDA $ 47,631 $ 46,032 $ 1,599 The Gathering segment’s third quarter GAAP earnings increased $0.8 million versus the prior year primarily due to higher operating revenues, partly offset by higher DD&A expense. Operating revenues increased $1.2 million, or 2%, which was the result of a $2.2 million increase in revenue from Seneca and a $1.0 million decrease in revenue from non-affiliated parties. DD&A expense increased $0.7 million primarily due to higher average depreciable plant in service compared to the prior year.
Downstream Business
Utility Segment
The Utility segment operations are carried out by Distribution Corporation, which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania.
Three Months Ended June 30, (in thousands) 2024 2023 Variance GAAP Earnings $ 2,559 $ 37 $ 2,522 Adjusted EBITDA $ 21,047 $ 20,912 $ 135 The Utility segment’s third quarter GAAP earnings increased $2.5 million versus the prior year due to higher customer margins (operating revenues less purchased gas sold) and a lower effective income tax rate, partially offset by an increase in O&M and DD&A expenses.
The $3.4 million increase in customer margin for the quarter was primarily due to the impact of the base rate increase in Distribution Corporation’s Pennsylvania jurisdiction. Higher revenues from the Company’s system modernization tracking mechanisms in its New York service territory also contributed to the increase. These increases were partially offset by a decrease in customer usage due primarily to warmer weather as compared to the prior-year third quarter. Weather was 35.3% and 28.3% warmer than the prior-year third quarter in Pennsylvania and New York, respectively. As part of Distribution Corporation’s rate settlement in Pennsylvania, the Company received approval to implement a weather normalization adjustment (“WNA”), which serves to help mitigate the impact of temperature fluctuations on usage and margin revenues billed to residential and small commercial customers during the months of October through May (subject to a 3% deadband). The Company recovered approximately $1.7 million from the Pennsylvania WNA mechanism in the current quarter. Distribution Corporation continues to benefit from a WNA mechanism in its New York jurisdiction, which generated revenue of $2.1 million during the quarter, an increase of $1.4 million over the prior year, which also helped to mitigate the impact of warmer weather on margins.
O&M expense increased by $3.4 million, primarily driven by higher personnel costs largely due to an increase in headcount and a slight increase in wage rates. Increases in professional and legal fees related to the current New York rate case proceeding and higher technology-related costs also contributed to the increase. These increases were partially offset by a decline in the accrual for uncollectible accounts due to a decrease in the natural gas commodity component of customer bills. DD&A expense increased $1.4 million primarily due to higher average depreciable plant in service compared to the prior year.
The reduction in the Utility segment’s effective income tax rate was primarily driven by an increase in tax deductions related to certain repairs and maintenance expenditures as a result of updated IRS guidance published in 2023.
Corporate and All Other
The Company’s operations that are included in Corporate and All Other generated a combined net loss of $0.4 million in the current-year third quarter, which was $1.7 million lower than the combined earnings of $1.3 million in the prior-year third quarter. The reduction in earnings was primarily driven by a $1.0 million decrease in investment income on marketable securities and corporate-owned life insurance policies.
EARNINGS TELECONFERENCE
The Company will host a conference call on Thursday, August 1, 2024, at 10 a.m. Eastern Time to discuss this announcement. All participants must pre-register to join this conference using the Participant Registration link. Once registered, an email will be sent with important details for this conference, as well as a unique Registrant ID. A webcast link to the conference call will be provided under the Events Calendar on the NFG Investor Relations website at investor.nationalfuelgas.com. A replay will be available following the call through the end of the day, Thursday, August 8, 2024. To access the replay, dial 1-800-770-2030 and provide Playback ID 99768.
National Fuel is an integrated energy company reporting financial results for four operating segments: Exploration and Production, Pipeline and Storage, Gathering, and Utility. Additional information about National Fuel is available at www.nationalfuelgas.com.
Certain statements contained herein, including statements identified by the use of the words “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “plans,” “predicts,” “projects,” “believes,” “seeks,” “will,” “may” and similar expressions, and statements which are other than statements of historical facts, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The Company’s expectations, beliefs and projections contained herein are expressed in good faith and are believed to have a reasonable basis, but there can be no assurance that such expectations, beliefs or projections will result or be achieved or accomplished. In addition to other factors, the following are important factors that could cause actual results to differ materially from those discussed in the forward-looking statements: impairments under the SEC’s full cost ceiling test for natural gas reserves; changes in the price of natural gas; changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design, retained natural gas and system modernization), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; the Company’s ability to estimate accurately the time and resources necessary to meet emissions targets; governmental/regulatory actions and/or market pressures to reduce or eliminate reliance on natural gas; increased costs or delays or changes in plans with respect to Company projects or related projects of other companies, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; changes in economic conditions, including inflationary pressures, supply chain issues, liquidity challenges, and global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; 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 price differentials between similar quantities of natural gas 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 reserves, including among others geology, lease availability and costs, title disputes, weather conditions, water availability and disposal or recycling opportunities of used water, 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; the Company’s ability to complete strategic transactions; 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 having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; negotiations with the collective bargaining units representing the Company’s workforce, including potential work stoppages during negotiations; uncertainty of natural gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas; changes in demographic patterns and weather conditions (including those related to climate change); 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, as well as economic and operational disruptions due to third-party outages; 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 SUBSIDIARIESGUIDANCE SUMMARY
As discussed on page 2, the Company is revising its earnings guidance for fiscal 2024 and initiating guidance for fiscal 2025. Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2024 and fiscal 2025 are outlined in the table below.
The revised earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the nine months ended June 30, 2024, including: (1) the after tax impairment of exploration and production properties, which reduced earnings by $1.57 per share; (2) after-tax unrealized losses on a derivative asset, which reduced earnings by $0.04 per share; and (3) after-tax unrealized gains on other investments, which increased earnings by $0.02 per share. While the Company expects to record certain adjustments to unrealized gain or loss on a derivative asset and unrealized gain or loss on investments during the three months ending September 30, 2024, the amounts of these and other potential adjustments and charges, including ceiling test impairments, 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 2024 Guidance Preliminary FY 2025 Guidance Adjusted Consolidated Earnings per Share, excluding items impacting comparability $5.00 to $5.10 $5.75 to $6.25 Consolidated Effective Tax Rate ~ 24.5% ~ 24.5 - 25% Capital Expenditures (Millions) Exploration and Production $525 - $545 $495 - $525 Pipeline and Storage $120 - $140 $130 - $150 Gathering $95 - $110 $95 - $110 Utility $150 - $175 $165 - $185 Consolidated Capital Expenditures $890 - $970 $885 - $970 Exploration and Production Segment Guidance* Commodity Price Assumptions NYMEX natural gas price $2.40 /MMBtu $3.25 /MMBtu Appalachian basin spot price $1.50 /MMBtu $2.30 /MMBtu Production (Bcf) 390 to 400 400 to 420 E&P Operating Costs ($/Mcf) LOE ~ $0.69 $0.68 - $0.70 G&A ~ $0.18 $0.18 - $0.19 DD&A $0.70 - $0.72 $0.70 - $0.74 Other Business Segment Guidance (Millions) Gathering Segment Revenues $240 - $250 $245 - $255 Pipeline and Storage Segment Revenues $400 - $415 $415 - $435 * Fiscal 2024 commodity price assumptions are for the remaining three months of the fiscal year.
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED JUNE 30, 2024 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Third quarter 2023 GAAP earnings $ 43,329 $ 23,813 $ 24,135 $ 37 $ 1,306 $ 92,620 Items impacting comparability: Unrealized (gain) loss on derivative asset 1,430 1,430 Tax impact of unrealized (gain) loss on derivative asset (392) (392) Unrealized (gain) loss on other investments (355) (355) Tax impact of unrealized (gain) loss on other investments 74 74 Third quarter 2023 adjusted operating results 44,367 23,813 24,135 37 1,025 93,377 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 3,158 3,158 Higher (lower) realized natural gas prices, after hedging 248 248 Midstream Revenues Higher (lower) operating revenues 10,289 959 11,248 Downstream Margins*** Impact of usage and weather (2,404) (2,404) Impact of new rates in Pennsylvania 2,285 2,285 System modernization and improvement tracker revenues 3,528 3,528 Higher (lower) other operating revenues (435) (435) Operating Expenses Lower (higher) lease operating and transportation expenses (3,765) (3,765) Lower (higher) operating expenses (3,558) (1,518) 369 (2,711) (435) (7,853) Lower (higher) property, franchise and other taxes (596) (596) Lower (higher) depreciation / depletion (6,473) (570) (589) (1,087) (8,719) Other Income (Expense) Higher (lower) other income (623) (623) (Higher) lower interest expense (823) (776) (1,599) Income Taxes Lower (higher) income tax expense / effective tax rate 1,413 (510) (22) 3,290 (142) 4,029 All other / rounding (128) (38) 127 56 (171) (154) Third quarter 2024 adjusted operating results 33,843 30,690 24,979 2,559 (346) 91,725 Items impacting comparability: Impairment of exploration and production properties (200,696) (200,696) Tax impact of impairment of exploration and production properties 55,686 55,686 Unrealized gain (loss) on derivative asset (1,186) (1,186) Tax impact of unrealized gain (loss) on derivative asset 325 325 Unrealized gain (loss) on other investments (15) (15) Tax impact of unrealized gain (loss) on other investments 3 3 Third quarter 2024 GAAP earnings $ (112,028) $ 30,690 $ 24,979 $ 2,559 $ (358) $ (54,158) * Amounts do not reflect intercompany eliminations. ** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED JUNE 30, 2024 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Third quarter 2023 GAAP earnings per share $ 0.47 $ 0.26 $ 0.26 $ — $ 0.01 $ 1.00 Items impacting comparability: Unrealized (gain) loss on derivative asset, net of tax 0.01 0.01 Unrealized (gain) loss on other investments, net of tax — — Third quarter 2023 adjusted operating results per share 0.48 0.26 0.26 — 0.01 1.01 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.03 0.03 Higher (lower) realized natural gas prices, after hedging — — Midstream Revenues Higher (lower) operating revenues 0.11 0.01 0.12 Downstream Margins*** Impact of usage and weather (0.03) (0.03) Impact of new rates in Pennsylvania 0.02 0.02 System modernization and improvement tracker revenues 0.04 0.04 Higher (lower) other operating revenues — — Operating Expenses Lower (higher) lease operating and transportation expenses (0.04) (0.04) Lower (higher) operating expenses (0.04) (0.02) — (0.03) — (0.09) Lower (higher) property, franchise and other taxes (0.01) (0.01) Lower (higher) depreciation / depletion (0.07) (0.01) (0.01) (0.01) (0.10) Other Income (Expense) Higher (lower) other income (0.01) (0.01) (Higher) lower interest expense (0.01) (0.01) (0.02) Income Taxes Lower (higher) income tax expense / effective tax rate 0.02 (0.01) — 0.04 — 0.05 All other / rounding 0.01 0.01 0.01 — (0.01) 0.02 Third quarter 2024 adjusted operating results per share 0.37 0.33 0.27 0.03 (0.01) 0.99 Items impacting comparability: Impairment of exploration and production properties, net of tax (1.58) (1.58) Unrealized gain (loss) on derivative asset, net of tax (0.01) (0.01) Unrealized gain (loss) on other investments, net of tax — — Rounding 0.01 0.01 Third quarter 2024 GAAP earnings per share $ (1.22) $ 0.33 $ 0.27 $ 0.03 $ — $ (0.59) * Amounts do not reflect intercompany eliminations. ** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS NINE MONTHS ENDED JUNE 30, 2024 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Nine months ended June 30, 2023 GAAP earnings $ 195,503 $ 77,147 $ 73,207 $ 55,574 $ 1,758 $ 403,189 Items impacting comparability: Unrealized (gain) loss on derivative asset 3,702 3,702 Tax impact of unrealized (gain) loss on derivative asset (1,015) (1,015) Unrealized (gain) loss on other investments (1,632) (1,632) Tax impact of unrealized (gain) loss on other investments 343 343 Nine months ended June 30, 2023 adjusted operating results 198,190 77,147 73,207 55,574 469 404,587 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 44,664 44,664 Higher (lower) realized natural gas prices, after hedging (39,994) (39,994) Higher (lower) other operating revenues (3,607) (3,607) Midstream Revenues Higher (lower) operating revenues 17,931 11,377 29,308 Downstream Margins*** Impact of usage and weather (710) (710) Impact of new rates in Pennsylvania 17,663 17,663 System modernization and improvement tracker revenues 6,210 6,210 Regulatory revenue adjustments (2,119) (2,119) Higher (lower) other operating revenues (1,923) (1,923) Operating Expenses Lower (higher) lease operating and transportation expenses (11,197) (11,197) Lower (higher) operating expenses (7,903) (4,456) (7,725) (1,578) (21,662) Lower (higher) property, franchise and other taxes 3,301 3,301 Lower (higher) depreciation / depletion (31,161) (2,594) (1,728) (2,570) (38,053) Other Income (Expense) Higher (lower) other income 1,260 1,283 (1,794) 749 (Higher) lower interest expense (4,738) (2,367) 578 1,906 (4,621) Income Taxes Lower (higher) income tax expense / effective tax rate 2,895 (845) (1,003) 7,535 64 8,646 All other / rounding 599 (594) 79 630 282 996 Nine months ended June 30, 2024 adjusted operating results 151,049 85,482 82,510 73,848 (651) 392,238 Items impacting comparability: Impairment of exploration and production properties (200,696) (200,696) Tax impact of impairment of exploration and production properties 55,686 55,686 Unrealized gain (loss) on derivative asset (4,848) (4,848) Tax impact of unrealized gain (loss) on derivative asset 1,330 1,330 Unrealized gain (loss) on other investments 1,803 1,803 Tax impact of unrealized gain (loss) on other investments (379) (379) Nine months ended June 30, 2024 GAAP earnings $ 2,521 $ 85,482 $ 82,510 $ 73,848 $ 773 $ 245,134 * Amounts do not reflect intercompany eliminations. ** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE NINE MONTHS ENDED JUNE 30, 2024 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Nine months ended June 30, 2023 GAAP earnings per share $ 2.12 $ 0.84 $ 0.79 $ 0.60 $ 0.02 $ 4.37 Items impacting comparability: Unrealized (gain) loss on derivative asset, net of tax 0.03 0.03 Unrealized (gain) loss on other investments, net of tax (0.01) (0.01) Rounding (0.01) (0.01) Nine months ended June 30, 2023 adjusted operating results per share 2.15 0.84 0.79 0.60 — 4.38 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.48 0.48 Higher (lower) realized natural gas prices, after hedging (0.43) (0.43) Higher (lower) other operating revenues (0.04) (0.04) Midstream Revenues Higher (lower) operating revenues 0.19 0.12 0.31 Downstream Margins*** Impact of usage and weather (0.01) (0.01) Impact of new rates in Pennsylvania 0.19 0.19 System modernization and improvement tracker revenues 0.07 0.07 Regulatory revenue adjustments (0.02) (0.02) Higher (lower) other operating revenues (0.02) (0.02) Operating Expenses Lower (higher) lease operating and transportation expenses (0.12) (0.12) Lower (higher) operating expenses (0.09) (0.05) (0.08) (0.02) (0.24) Lower (higher) property, franchise and other taxes 0.04 0.04 Lower (higher) depreciation / depletion (0.34) (0.03) (0.02) (0.03) (0.42) Other Income (Expense) Higher (lower) other income 0.01 0.01 (0.02) — (Higher) lower interest expense (0.05) (0.03) 0.01 0.02 (0.05) Income Taxes Lower (higher) income tax expense / effective tax rate 0.03 (0.01) (0.01) 0.08 — 0.09 All other / rounding — — — 0.01 0.02 0.03 Nine months ended June 30, 2024 adjusted operating results per share 1.63 0.92 0.89 0.80 — 4.24 Items impacting comparability: Impairment of exploration and production properties, net of tax (1.57) (1.57) Unrealized gain (loss) on derivative asset, net of tax (0.04) (0.04) Unrealized gain (loss) on other investments, net of tax 0.02 0.02 Rounding 0.01 (0.01) — Nine months ended June 30, 2024 GAAP earnings per share $ 0.03 $ 0.92 $ 0.89 $ 0.80 $ 0.01 $ 2.65 * Amounts do not reflect intercompany eliminations. ** Drivers of adjusted operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES (Thousands of Dollars, except per share amounts) Three Months Ended Nine Months Ended June 30, June 30, (Unaudited) (Unaudited) SUMMARY OF OPERATIONS 2024 2023 2024 2023 Operating Revenues: Utility Revenues $ 124,858 $ 144,538 $ 616,977 $ 862,914 Exploration and Production and Other Revenues 220,905 216,581 739,537 738,107 Pipeline and Storage and Gathering Revenues 71,679 67,585 216,228 203,803 417,442 428,704 1,572,742 1,804,824 Operating Expenses: Purchased Gas 4,952 35,425 167,444 450,461 Operation and Maintenance: Utility 53,412 50,080 166,405 156,885 Exploration and Production and Other 35,148 27,659 102,768 86,315 Pipeline and Storage and Gathering 40,019 38,607 114,321 109,347 Property, Franchise and Other Taxes 21,201 20,427 66,635 71,999 Depreciation, Depletion and Amortization 113,454 102,410 348,179 299,973 Impairment of Exploration and Production Properties 200,696 — 200,696 — 468,882 274,608 1,166,448 1,174,980 Operating Income (Loss) (51,440) 154,096 406,294 629,844 Other Income (Expense): Other Income (Deductions) 3,188 3,551 12,989 12,754 Interest Expense on Long-Term Debt (32,876) (26,311) (89,791) (83,499) Other Interest Expense (1,341) (5,781) (14,250) (15,485) Income (Loss) Before Income Taxes (82,469) 125,555 315,242 543,614 Income Tax Expense (Benefit) (28,311) 32,935 70,108 140,425 Net Income (Loss) Available for Common Stock $ (54,158) $ 92,620 $ 245,134 $ 403,189 Earnings (Loss) Per Common Share Basic $ (0.59) $ 1.01 $ 2.67 $ 4.40 Diluted $ (0.59) $ 1.00 $ 2.65 $ 4.37 Weighted Average Common Shares: Used in Basic Calculation 91,874,049 91,803,638 91,966,034 91,725,286 Used in Diluted Calculation 91,874,049 92,294,666 92,467,787 92,268,904 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, September 30, (Thousands of Dollars) 2024 2023 ASSETS Property, Plant and Equipment $14,245,690 $13,635,303 Less - Accumulated Depreciation, Depletion and Amortization 6,834,824 6,335,441 Net Property, Plant and Equipment 7,410,866 7,299,862 Current Assets: Cash and Temporary Cash Investments 81,414 55,447 Receivables - Net 156,846 160,601 Unbilled Revenue 15,032 16,622 Gas Stored Underground 14,186 32,509 Materials and Supplies - at average cost 48,331 48,989 Other Current Assets 82,923 100,260 Total Current Assets 398,732 414,428 Other Assets: Recoverable Future Taxes 80,820 69,045 Unamortized Debt Expense 6,007 7,240 Other Regulatory Assets 73,934 72,138 Deferred Charges 89,740 82,416 Other Investments 79,547 73,976 Goodwill 5,476 5,476 Prepaid Pension and Post-Retirement Benefit Costs 230,591 200,301 Fair Value of Derivative Financial Instruments 100,317 50,487 Other 5,007 4,891 Total Other Assets 671,439 565,970 Total Assets $8,481,037 $8,280,260 CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 91,612,488 Shares and 91,819,405 Shares, Respectively $91,612 $91,819 Paid in Capital 1,046,479 1,040,761 Earnings Reinvested in the Business 1,970,384 1,885,856 Accumulated Other Comprehensive Income (Loss) 5,050 (55,060) Total Comprehensive Shareholders' Equity 3,113,525 2,963,376 Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,637,115 2,384,485 Total Capitalization 5,750,640 5,347,861 Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper — 287,500 Current Portion of Long-Term Debt 50,000 — Accounts Payable 101,200 152,193 Amounts Payable to Customers 62,569 59,019 Dividends Payable 47,195 45,451 Interest Payable on Long-Term Debt 46,926 20,399 Customer Advances — 21,003 Customer Security Deposits 36,674 28,764 Other Accruals and Current Liabilities 169,133 160,974 Fair Value of Derivative Financial Instruments 2,941 31,009 Total Current and Accrued Liabilities 516,638 806,312 Other Liabilities: Deferred Income Taxes 1,172,068 1,124,170 Taxes Refundable to Customers 302,733 268,562 Cost of Removal Regulatory Liability 289,356 277,694 Other Regulatory Liabilities 164,390 165,441 Other Post-Retirement Liabilities 2,741 2,915 Asset Retirement Obligations 157,653 165,492 Other Liabilities 124,818 121,813 Total Other Liabilities 2,213,759 2,126,087 Commitments and Contingencies — — Total Capitalization and Liabilities $8,481,037 $8,280,260 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 30, (Thousands of Dollars) 2024 2023 Operating Activities: Net Income Available for Common Stock $ 245,134 $ 403,189 Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:Impairment of Exploration and Production Properties 200,696 — Depreciation, Depletion and Amortization 348,179 299,973 Deferred Income Taxes 47,212 101,096 Stock-Based Compensation 15,984 15,807 Other 18,542 16,640 Change in: Receivables and Unbilled Revenue 5,253 192,324 Gas Stored Underground and Materials and Supplies 18,981 11,757 Unrecovered Purchased Gas Costs — 75,244 Other Current Assets 17,431 (12,230) Accounts Payable (13,705) (52,340) Amounts Payable to Customers 3,550 21,972 Customer Advances (21,003) (26,108) Customer Security Deposits 7,910 9,741 Other Accruals and Current Liabilities 23,846 45,363 Other Assets (35,346) (39,367) Other Liabilities (14,649) (7,949) Net Cash Provided by Operating Activities $ 868,015 $ 1,055,112 Investing Activities: Capital Expenditures $ (684,200) $ (727,738) Acquisition of Upstream Assets — (124,758) Sale of Fixed Income Mutual Fund Shares in Grantor Trust — 10,000 Other (1,371) 13,397 Net Cash Used in Investing Activities $ (685,571) $ (829,099) Financing Activities: Proceeds from Issuance of Short-Term Note Payable to Bank $ — $ 250,000 Repayment of Short-Term Note Payable to Bank — (250,000) Net Change in Other Short-Term Notes Payable to Banks and Commercial Paper (287,500) 78,500 Shares Repurchased Under Repurchase Plan (27,847) — Reduction of Long-Term Debt — (549,000) Net Proceeds From Issuance of Long-Term Debt 299,396 297,533 Dividends Paid on Common Stock (136,610) (130,653) Net Repurchases of Common Stock Under Stock and Benefit Plans (3,916) (6,696) Net Cash Used in Financing Activities $ (156,477) $ (310,316) Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash 25,967 (84,303) Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 55,447 137,718 Cash, Cash Equivalents, and Restricted Cash at June 30 $ 81,414 $ 53,415 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) UPSTREAM BUSINESS Three Months Ended Nine Months Ended (Thousands of Dollars, except per share amounts) June 30, June 30, EXPLORATION AND PRODUCTION SEGMENT 2024 2023 Variance 2024 2023 Variance Total Operating Revenues $ 220,905 $ 216,581 $ 4,324 $ 739,537 $ 738,107 $ 1,430 Operating Expenses: Operation and Maintenance: General and Administrative Expense 18,213 15,877 2,336 53,170 48,910 4,260 Lease Operating and Transportation Expense 66,581 61,815 4,766 203,317 189,144 14,173 All Other Operation and Maintenance Expense 4,526 2,358 2,168 12,714 6,970 5,744 Property, Franchise and Other Taxes 3,050 2,295 755 9,764 13,943 (4,179) Depreciation, Depletion and Amortization 68,778 60,584 8,194 214,191 174,747 39,444 Impairment of Exploration and Production Properties 200,696 — 200,696 200,696 — 200,696 361,844 142,929 218,915 693,852 433,714 260,138 Operating Income (Loss) (140,939) 73,652 (214,591) 45,685 304,393 (258,708) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit 100 347 (247) 301 1,042 (741) Interest and Other Income (Deductions) (488) (806) 318 (830) (1,098) 268 Interest Expense (14,670) (13,628) (1,042) (45,046) (39,049) (5,997) Income (Loss) Before Income Taxes (155,997) 59,565 (215,562) 110 265,288 (265,178) Income Tax Expense (Benefit) (43,969) 16,236 (60,205) (2,411) 69,785 (72,196) Net Income (Loss) $ (112,028) $ 43,329 $ (155,357) $ 2,521 $ 195,503 $ (192,982) Net Income (Loss) Per Share (Diluted) $ (1.22) $ 0.47 $ (1.69) $ 0.03 $ 2.12 $ (2.09) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) MIDSTREAM BUSINESSES Three Months Ended Nine Months Ended (Thousands of Dollars, except per share amounts) June 30, June 30, PIPELINE AND STORAGE SEGMENT 2024 2023 Variance 2024 2023 Variance Revenues from External Customers $ 68,035 $ 62,956 $ 5,079 $ 204,071 $ 194,800 $ 9,271 Intersegment Revenues 37,384 29,439 7,945 103,781 90,354 13,427 Total Operating Revenues 105,419 92,395 13,024 307,852 285,154 22,698 Operating Expenses: Purchased Gas 614 223 391 1,540 1,111 429 Operation and Maintenance 28,128 26,207 1,921 83,142 77,501 5,641 Property, Franchise and Other Taxes 8,456 8,329 127 25,776 25,452 324 Depreciation, Depletion and Amortization 18,453 17,732 721 56,157 52,874 3,283 55,651 52,491 3,160 166,615 156,938 9,677 Operating Income 49,768 39,904 9,864 141,237 128,216 13,021 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit 1,257 1,330 (73) 3,772 3,990 (218) Interest and Other Income 2,362 1,831 531 6,340 4,653 1,687 Interest Expense (11,855) (10,873) (982) (35,698) (32,702) (2,996) Income Before Income Taxes 41,532 32,192 9,340 115,651 104,157 11,494 Income Tax Expense 10,842 8,379 2,463 30,169 27,010 3,159 Net Income $ 30,690 $ 23,813 $ 6,877 $ 85,482 $ 77,147 $ 8,335 Net Income Per Share (Diluted) $ 0.33 $ 0.26 $ 0.07 $ 0.92 $ 0.84 $ 0.08 Three Months Ended Nine Months Ended June 30, June 30, GATHERING SEGMENT 2024 2023 Variance 2024 2023 Variance Revenues from External Customers $ 3,644 $ 4,629 $ (985) $ 12,157 $ 9,003 $ 3,154 Intersegment Revenues 56,476 54,277 2,199 174,544 163,297 11,247 Total Operating Revenues 60,120 58,906 1,214 186,701 172,300 14,401 Operating Expenses: Operation and Maintenance 12,382 12,849 (467) 32,682 33,252 (570) Property, Franchise and Other Taxes 107 25 82 224 39 185 Depreciation, Depletion and Amortization 9,732 8,987 745 28,800 26,613 2,187 22,221 21,861 360 61,706 59,904 1,802 Operating Income 37,899 37,045 854 124,995 112,396 12,599 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit 9 37 (28) 28 112 (84 ) Interest and Other Income 113 63 50 257 458 (201 ) Interest Expense (3,393) (3,613) 220 (10,824) (11,556) 732 Income Before Income Taxes 34,628 33,532 1,096 114,456 101,410 13,046 Income Tax Expense 9,649 9,397 252 31,946 28,203 3,743 Net Income $ 24,979 $ 24,135 $ 844 $ 82,510 $ 73,207 $ 9,303 Net Income Per Share (Diluted) $ 0.27 $ 0.26 $ 0.01 $ 0.89 $ 0.79 $ 0.10 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) DOWNSTREAM BUSINESS Three Months Ended Nine Months Ended (Thousands of Dollars, except per share amounts) June 30, June 30, UTILITY SEGMENT 2024 2023 Variance 2024 2023 Variance Revenues from External Customers $ 124,858 $ 144,538 $ (19,680) $ 616,977 $ 862,914 $ (245,937) Intersegment Revenues 86 79 7 479 500 (21) Total Operating Revenues 124,944 144,617 (19,673) 617,456 863,414 (245,958) Operating Expenses: Purchased Gas 40,096 63,151 (23,055) 264,983 533,452 (268,469) Operation and Maintenance 54,349 50,915 3,434 169,261 159,483 9,778 Property, Franchise and Other Taxes 9,452 9,639 (187) 30,471 32,169 (1,698) Depreciation, Depletion and Amortization 16,373 14,997 1,376 48,678 45,425 3,253 120,270 138,702 (18,432) 513,393 770,529 (257,136) Operating Income 4,674 5,915 (1,241) 104,063 92,885 11,178 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit (Costs) 462 8 454 1,788 (5) 1,793 Interest and Other Income 1,485 1,694 (209) 4,735 4,903 (168) Interest Expense (8,417) (8,441) 24 (25,402) (26,193) 791 Income (Loss) Before Income Taxes (1,796) (824) (972) 85,184 71,590 13,594 Income Tax Expense (Benefit) (4,355) (861) (3,494) 11,336 16,016 (4,680) Net Income $ 2,559 $ 37 $ 2,522 $ 73,848 $ 55,574 $ 18,274 Net Income Per Share (Diluted) $ 0.03 $ — $ 0.03 $ 0.80 $ 0.60 $ 0.20 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) Three Months Ended Nine Months Ended (Thousands of Dollars, except per share amounts) June 30, June 30, ALL OTHER 2024 2023 Variance 2024 2023 Variance Total Operating Revenues $ — $ — $ — $ — $ — $ — Operating Expenses: Operation and Maintenance — — — — 21 (21) — — — — 21 (21) Operating Loss — — — — (21) 21 Other Income (Expense): Interest and Other Income (Deductions) (65) (65) — (184) (451) 267 Interest Expense (97) (41) (56) (262) (89) (173) Loss before Income Taxes (162) (106) (56) (446) (561) 115 Income Tax Benefit (38) (25) (13) (105) (131) 26 Net Loss $ (124) $ (81) $ (43) $ (341) $ (430) $ 89 Net Loss Per Share (Diluted) $ — $ — $ — $ — $ — $ — Three Months Ended Nine Months Ended June 30, June 30, CORPORATE 2024 2023 Variance 2024 2023 Variance Revenues from External Customers $ — $ — $ — $ — $ — $ — Intersegment Revenues 1,285 1,152 133 3,856 3,455 401 Total Operating Revenues 1,285 1,152 133 3,856 3,455 401 Operating Expenses: Operation and Maintenance 3,873 3,323 550 12,789 10,770 2,019 Property, Franchise and Other Taxes 136 139 (3) 400 396 4 Depreciation, Depletion and Amortization 118 110 8 353 314 39 4,127 3,572 555 13,542 11,480 2,062 Operating Loss (2,842) (2,420) (422) (9,686) (8,025) (1,661 ) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (386) (354) (32) (1,161) (1,063) (98 ) Interest and Other Income 39,025 36,312 2,713 120,288 111,598 8,690 Interest Expense on Long-Term Debt (32,876) (26,311) (6,565) (89,791) (83,499) (6,292 ) Other Interest Expense (3,595) (6,031) 2,436 (19,363) (17,281) (2,082 ) Income (Loss) before Income Taxes (674) 1,196 (1,870) 287 1,730 (1,443 ) Income Tax Benefit (440) (191) (249) (827) (458) (369 ) Net Income (Loss) $ (234) $ 1,387 $ (1,621) $ 1,114 $ 2,188 $ (1,074 ) Net Income (Loss) Per Share (Diluted) $ — $ 0.01 $ (0.01) $ 0.01 $ 0.02 $ (0.01 ) Three Months Ended Nine Months Ended June 30, June 30, INTERSEGMENT ELIMINATIONS 2024 2023 Variance 2024 2023 Variance Intersegment Revenues $ (95,231) $ (84,947) $ (10,284) $ (282,660) $ (257,606) $ (25,054) Operating Expenses: Purchased Gas (35,758) (27,949) (7,809) (99,079) (84,102) (14,977) Operation and Maintenance (59,473) (56,998) (2,475) (183,581) (173,504) (10,077) (95,231) (84,947) (10,284) (282,660) (257,606) (25,054) Operating Income — — — — — — Other Income (Expense): Interest and Other Deductions (40,686) (36,846) (3,840) (122,345) (111,385) (10,960) Interest Expense 40,686 36,846 3,840 122,345 111,385 10,960 Net Income $ — $ — $ — $ — $ — $ — Net Income Per Share (Diluted) $ — $ — $ — $ — $ — $ — NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Continued) (Thousands of Dollars) Three Months Ended Nine Months Ended June 30, June 30, (Unaudited) (Unaudited) Increase Increase 2024 2023 (Decrease) 2024 2023 (Decrease) Capital Expenditures: Exploration and Production(1) $ 114,679 (2) $ 269,171 (4) $ (154,492) $ 399,820 (2)(3) $ 592,787 (4)(5) $ (192,967) Pipeline and Storage 26,212 (2) 33,503 (4) (7,291) 68,791 (2)(3) 66,767 (4)(5) 2,024 Gathering 29,570 (2) 21,297 (4) 8,273 69,088 (2)(3) 55,379 (4)(5) 13,709 Utility 49,257 (2) 39,446 (4) 9,811 117,508 (2)(3) 88,676 (4)(5) 28,832 Total Reportable Segments 219,718 363,417 (143,699) 655,207 803,609 (148,402) All Other — — — — — — Corporate 71 45 26 253 449 (196) Total Capital Expenditures $ 219,789 $ 363,462 $ (143,673) $ 655,460 $ 804,058 $ (148,598) (1) The quarter and nine months ended June 30, 2024 includes $6.2 million related to the acquisition of assets from UGI. The quarter and nine months ended June 30, 2023 includes $124.8 million related to the acquisition of upstream assets acquired from SWN, as well as $11.5 million related to the acquisition of assets from EXCO. The acquisition cost for the assets acquired from SWN is reported as a component of Acquisition of Upstream Assets on the Consolidated Statement of Cash Flows.
(2) Capital expenditures for the quarter and nine months ended June 30, 2024, include accounts payable and accrued liabilities related to capital expenditures of $50.9 million, $7.0 million, $14.6 million, and $8.0 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at June 30, 2024, since they represent non-cash investing activities at that date.
(3) Capital expenditures for the nine months ended June 30, 2024, exclude capital expenditures of $43.2 million, $31.8 million, $20.6 million and $13.6 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2023 and paid during the nine months ended June 30, 2024. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2023, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at June 30, 2024.
(4) Capital expenditures for the quarter and nine months ended June 30, 2023, include accounts payable and accrued liabilities related to capital expenditures of $52.8 million, $7.7 million, $2.8 million, and $8.5 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were excluded from the Consolidated Statement of Cash Flows at June 30, 2023, since they represented non-cash investing activities at that date.
(5) Capital expenditures for the nine months ended June 30, 2023, exclude capital expenditures of $83.0 million, $15.2 million, $10.7 million and $11.4 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, 2022 and paid during the nine months ended June 30, 2023. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2022, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at June 30, 2023.DEGREE DAYS Percent Colder (Warmer) Than: Three Months Ended June 30, Normal 2024 2023 Normal (1) Last Year (1) Buffalo, NY 912 565 788 (38.0) (28.3) Erie, PA(2) 776 519 802 (33.1) (35.3) Nine Months Ended June 30, Buffalo, NY 6,491 5,128 5,656 (21.0) (9.3) Erie, PA(2) 5,727 4,759 5,434 (16.9) (12.4) (1) Percents compare actual 2024 degree days to normal degree days and actual 2024 degree days to actual 2023 degree days.
(2) Normal degree days changed from NOAA 30-year degree days to NOAA 15-year degree days with the implementation of new base rates in Pennsylvania in August 2023.NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2024 2023 (Decrease) 2024 2023 (Decrease) Gas Production/Prices: Production (MMcf) Appalachia 96,504 94,747 1,757 300,144 278,562 21,582 Average Prices (Per Mcf) Weighted Average $ 1.50 $ 1.66 $ (0.16) $ 1.93 $ 3.05 $ (1.12 ) Weighted Average after Hedging 2.28 2.27 0.01 2.45 2.62 (0.17 ) Selected Operating Performance Statistics: General and Administrative Expense per Mcf (1) $ 0.19 $ 0.17 $ 0.02 $ 0.18 $ 0.18 $ — Lease Operating and Transportation Expense per Mcf (1)(2) $ 0.69 $ 0.65 $ 0.04 $ 0.68 $ 0.68 $ — Depreciation, Depletion and Amortization per Mcf (1) $ 0.71 $ 0.64 $ 0.07 $ 0.71 $ 0.63 $ 0.08 (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 $0.59 and $0.55 per Mcf for the three months ended June 30, 2024 and June 30, 2023, respectively. Amounts include transportation expense of $0.57 and $0.57 per Mcf for the nine months ended June 30, 2024 and June 30, 2023, respectively.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Hedging Summary for Remaining Three Months of Fiscal 2024 Volume Average Hedge Price Gas Swaps NYMEX 38,670,000 MMBTU $ 3.35 / MMBTU No Cost Collars 14,400,000 MMBTU $ 3.22 / MMBTU (Floor) / $3.79 / MMBTU (Ceiling) Fixed Price Physical Sales 18,576,729 MMBTU $ 2.43 / MMBTU Total 71,646,729 MMBTU Hedging Summary for Fiscal 2025 Volume Average Hedge Price Gas Swaps NYMEX 115,030,000 MMBTU $ 3.49 / MMBTU No Cost Collars 57,085,000 MMBTU $ 3.44 / MMBTU (Floor) / $4.54 / MMBTU (Ceiling) Fixed Price Physical Sales 80,477,792 MMBTU $ 2.48 / MMBTU Total 252,592,792 MMBTU Hedging Summary for Fiscal 2026 Volume Average Hedge Price Gas Swaps NYMEX 40,635,000 MMBTU $ 3.95 / MMBTU No Cost Collars 50,595,000 MMBTU $ 3.48 / MMBTU (Floor) / $4.68 / MMBTU (Ceiling) Fixed Price Physical Sales 76,661,112 MMBTU $ 2.44 / MMBTU Total 167,891,112 MMBTU Hedging Summary for Fiscal 2027 Volume Average Hedge Price Gas Swaps NYMEX 21,750,000 MMBTU $ 4.16 / MMBTU No Cost Collars 3,560,000 MMBTU $ 3.53 / MMBTU (Floor) / $4.76 / MMBTU (Ceiling) Fixed Price Physical Sales 59,118,055 MMBTU $ 2.50 / MMBTU Total 84,428,055 MMBTU Hedging Summary for Fiscal 2028 Volume Average Hedge Price Gas Swaps NYMEX 1,750,000 MMBTU $ 4.16 / MMBTU Fixed Price Physical Sales 21,987,828 MMBTU $ 2.68 / MMBTU Total 23,737,828 MMBTU Hedging Summary for Fiscal 2029 Volume Average Hedge Price Fixed Price Physical Sales 7,051,614 MMBTU $ 2.88 / MMBTU Hedging Summary for Fiscal 2030 Volume Average Hedge Price Fixed Price Physical Sales 266,314 MMBTU $ 2.92 / MMBTU NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES Pipeline and Storage Throughput - (millions of cubic feet - MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2024 2023 (Decrease) 2024 2023 (Decrease) Firm Transportation - Affiliated 18,377 22,295 (3,918) 92,433 108,911 (16,478) Firm Transportation - Non-Affiliated 150,133 159,145 (9,012) 498,435 528,234 (29,799) Interruptible Transportation 118 97 21 1,508 2,024 (516) 168,628 181,537 (12,909) 592,376 639,169 (46,793) Gathering Volume - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2024 2023 (Decrease) 2024 2023 (Decrease) Gathered Volume 118,445 118,707 (262) 367,832 336,078 31,754 Utility Throughput - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2024 2023 (Decrease) 2024 2023 (Decrease) Retail Sales: Residential Sales 8,123 9,600 (1,477) 53,168 57,636 (4,468 ) Commercial Sales 1,308 1,434 (126) 8,401 8,812 (411 ) Industrial Sales 62 87 (25) 389 506 (117 ) 9,493 11,121 (1,628) 61,958 66,954 (4,996 ) Transportation 12,819 12,468 351 52,984 53,567 (583 ) 22,312 23,589 (1,277) 114,942 120,521 (5,579 ) NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURESIn 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 nine months ended June 30, 2024 and 2023:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands except per share amounts) 2024 2023 2024 2023 Reported GAAP Earnings $ (54,158) $ 92,620 $ 245,134 $ 403,189 Items impacting comparability: Impairment of exploration and production properties (E&P) 200,696 — 200,696 — Tax impact of impairment of exploration and production properties (55,686) — (55,686) — Unrealized (gain) loss on derivative asset (E&P) 1,186 1,430 4,848 3,702 Tax impact of unrealized (gain) loss on derivative asset (325) (392) (1,330) (1,015) Unrealized (gain) loss on other investments (Corporate / All Other) 15 (355) (1,803) (1,632) Tax impact of unrealized (gain) loss on other investments (3) 74 379 343 Adjusted Operating Results $ 91,725 $ 93,377 $ 392,238 $ 404,587 Reported GAAP Earnings Per Share $ (0.59) $ 1.00 $ 2.65 $ 4.37 Items impacting comparability: Impairment of exploration and production properties, net of tax (E&P) 1.58 — 1.57 — Unrealized (gain) loss on derivative asset, net of tax (E&P) 0.01 0.01 0.04 0.03 Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) — — (0.02) (0.01) Rounding (0.01) — — (0.01) Adjusted Operating Results Per Share $ 0.99 $ 1.01 $ 4.24 $ 4.38 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 nine months ended June 30, 2024 and 2023:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands) 2024 2023 2024 2023 Reported GAAP Earnings $ (54,158) $ 92,620 $ 245,134 $ 403,189 Depreciation, Depletion and Amortization 113,454 102,410 348,179 299,973 Other (Income) Deductions (3,188) (3,551) (12,989) (12,754) Interest Expense 34,217 32,092 104,041 98,984 Income Taxes (28,311) 32,935 70,108 140,425 Impairment of Exploration and Production Properties 200,696 — 200,696 — Adjusted EBITDA $ 262,710 $ 256,506 $ 955,169 $ 929,817 Adjusted EBITDA by Segment Pipeline and Storage Adjusted EBITDA $ 68,221 $ 57,636 $ 197,394 $ 181,090 Gathering Adjusted EBITDA 47,631 46,032 153,795 139,009 Total Midstream Businesses Adjusted EBITDA 115,852 103,668 351,189 320,099 Exploration and Production Adjusted EBITDA 128,535 134,236 460,572 479,140 Utility Adjusted EBITDA 21,047 20,912 152,741 138,310 Corporate and All Other Adjusted EBITDA (2,724) (2,310) (9,333) (7,732) Total Adjusted EBITDA $ 262,710 $ 256,506 $ 955,169 $ 929,817 NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDAThree Months Ended Nine Months Ended June 30, June 30, (in thousands) 2024 2023 2024 2023 Exploration and Production Segment Reported GAAP Earnings $ (112,028) $ 43,329 $ 2,521 $ 195,503 Depreciation, Depletion and Amortization 68,778 60,584 214,191 174,747 Other (Income) Deductions 388 459 529 56 Interest Expense 14,670 13,628 45,046 39,049 Income Taxes (43,969) 16,236 (2,411) 69,785 Impairment of Exploration and Production Properties 200,696 — 200,696 — Adjusted EBITDA $ 128,535 $ 134,236 $ 460,572 $ 479,140 Pipeline and Storage Segment Reported GAAP Earnings $ 30,690 $ 23,813 $ 85,482 $ 77,147 Depreciation, Depletion and Amortization 18,453 17,732 56,157 52,874 Other (Income) Deductions (3,619) (3,161) (10,112) (8,643) Interest Expense 11,855 10,873 35,698 32,702 Income Taxes 10,842 8,379 30,169 27,010 Adjusted EBITDA $ 68,221 $ 57,636 $ 197,394 $ 181,090 Gathering Segment Reported GAAP Earnings $ 24,979 $ 24,135 $ 82,510 $ 73,207 Depreciation, Depletion and Amortization 9,732 8,987 28,800 26,613 Other (Income) Deductions (122) (100) (285) (570) Interest Expense 3,393 3,613 10,824 11,556 Income Taxes 9,649 9,397 31,946 28,203 Adjusted EBITDA $ 47,631 $ 46,032 $ 153,795 $ 139,009 Utility Segment Reported GAAP Earnings $ 2,559 $ 37 $ 73,848 $ 55,574 Depreciation, Depletion and Amortization 16,373 14,997 48,678 45,425 Other (Income) Deductions (1,947) (1,702) (6,523) (4,898) Interest Expense 8,417 8,441 25,402 26,193 Income Taxes (4,355) (861) 11,336 16,016 Adjusted EBITDA $ 21,047 $ 20,912 $ 152,741 $ 138,310 Corporate and All Other Reported GAAP Earnings $ (358) $ 1,306 $ 773 $ 1,758 Depreciation, Depletion and Amortization 118 110 353 314 Other (Income) Deductions 2,112 953 3,402 1,301 Interest Expense (4,118) (4,463) (12,929) (10,516) Income Taxes (478) (216) (932) (589) Adjusted EBITDA $ (2,724) $ (2,310) $ (9,333) $ (7,732) NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
FREE CASH FLOWManagement defines free cash flow as net cash provided by operating activities, less net cash used in investing activities, adjusted for acquisitions and divestitures. The following table reconciles National Fuel's free cash flow to Net Cash Provided by Operating Activities on the Consolidated Statement of Cash Flows for the nine months ended June 30, 2024 and 2023:
Nine Months Ended June 30, (in thousands) 2024 2023 Net Cash Provided by Operating Activities $ 868,015 $ 1,055,112 Less: Net Cash Used in Investing Activities 685,571 829,099 182,444 226,013 Plus: Acquisitions — 124,758 Upstream Acquisitions Included in Capital Expenditures(1) 6,178 11,502 Free Cash Flow $ 188,622 $ 362,273 (1) Amount for the nine months ended June 30, 3024 of $6.2 million relates to the acquisition of assets from UGI. Amount for the nine months ended June 30, 2023 of $11.5 million relates to the acquisition of assets from EXCO. Both of these amounts are included in Capital Expenditures on the Consolidated Statement of Cash Flows for the respective periods.
The Company is unable to provide a reconciliation of any projected free cash flow measure to its comparable GAAP financial measure without unreasonable efforts. This is due to an inability to calculate the comparable GAAP projected metrics, including operating income and total production costs, given the unknown effect, timing, and potential significance of certain income statement items.
Analyst Contact: Natalie M. Fischer 716-857-7315 Media Contact: Karen L. Merkel 716-857-7654
