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National Fuel Reports Second Quarter Earnings
ソース: Nasdaq GlobeNewswire / 06 5 2021 16:45:02 America/New_York
WILLIAMSVILLE, N.Y., May 06, 2021 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the second quarter of its 2021 fiscal year and for the six months ended March 31, 2021.
FISCAL 2021 SECOND QUARTER SUMMARY
- GAAP net income of $112.4 million, or $1.23 per share, compared to GAAP net loss of $106.1 million, or $1.23 per share, in the prior year.
- Adjusted operating results of $123.2 million, or $1.34 per share, compared to $84.2 million, or $0.97 per share, in the prior year (see non-GAAP reconciliation on page 2).
- Adjusted EBITDA of $298.4 million, an increase of 29%, compared to $231.1 million in the prior year (see non-GAAP reconciliation on page 23).
- Pipeline & Storage segment Adjusted EBITDA of $58.6 million, an increase of 19% from the prior year.
- Gathering segment Adjusted EBITDA of $41.4 million, an increase of 40% from the prior year.
- E&P segment Adjusted EBITDA of $127.1 million, an increase of 59% from the prior year.
- E&P segment net production of 85.2 Bcfe, an increase of 25.5 Bcfe, or 43%, from the prior year.
- E&P segment cash operating costs (combined G&A expenses, LOE expense, other operation and maintenance expense, and property, franchise, and other taxes), of $1.09 per Mcfe, a 14% decrease from the prior year.
- Average realized natural gas prices of $2.28 per Mcf, an increase $0.16 per Mcf from the prior year.
- Average realized oil prices of $57.11 per Bbl, a decrease of $1.12 per Bbl from the prior year.
- Utility segment announced greenhouse gas emissions reduction targets for its delivery system of 75% by 2030, and 90% by 2050, from 1990 levels.
- Company is increasing its fiscal 2021 earnings guidance to a range of $3.85 to $4.05 per share, an increase of $0.15 at the midpoint, excluding items impacting comparability (see Guidance Summary on page 7).
MANAGEMENT COMMENTS
David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel had an excellent second quarter, with significant earnings growth resulting from the ongoing expansion of our interstate pipeline systems and the continued positive impact of our Appalachian upstream and gathering acquisition completed last summer. In light of these strong operating results, we are increasing our earnings guidance for fiscal 2021 to $3.85 to $4.05 per share, representing a 35% increase from the prior year at the midpoint of the updated range.
“During the quarter, our Pipeline and Storage business commenced construction of our FM100 expansion and modernization project, which remains on track for a late calendar 2021 in-service date. In addition to contributing $50 million in annual revenues to our FERC-regulated pipeline operations, this project, along with the companion Transco Leidy South expansion, is expected to provide additional access to premium markets in the Mid-Atlantic for Seneca’s growing production base. Additionally, we continued to make significant strides on our sustainability-focused initiatives, with our Utility business announcing substantial greenhouse gas emissions reduction goals in March, driven by ongoing investments in the modernization of our natural gas distribution network. Evidencing our commitment to the continued reduction of National Fuel’s carbon footprint, we are working towards emissions reduction targets for the Company's midstream and upstream segments, maintaining our focus on climate-risk and the energy transition, as well as National Fuel’s long-term role in the energy complex.”
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS Three Months Ended Six Months Ended March 31, March 31, (in thousands except per share amounts) 2021 2020 2021 2020 Reported GAAP Earnings $ 112,436 $ (106,068 ) $ 190,210 $ (19,477 ) Items impacting comparability: Impairment of oil and gas properties (E&P) — 177,761 76,152 177,761 Tax impact of impairment of oil and gas properties — (48,503 ) (20,980 ) (48,503 ) Gain on sale of timber properties (Corporate / All Other) — — (51,066 ) — Tax impact of gain on sale of timber properties — — 14,069 — Premium paid on early redemption of debt 15,715 — 15,715 — Tax impact of premium paid on early redemption of debt (4,321 ) — (4,321 ) — Deferred tax valuation allowance — 56,770 — 56,770 Unrealized (gain) loss on other investments (Corporate / All Other) (848 ) 5,414 450 6,433 Tax impact of unrealized (gain) loss on other investments 178 (1,137 ) (94 ) (1,351 ) Adjusted Operating Results $ 123,160 $ 84,237 $ 220,135 $ 171,633 Reported GAAP Earnings Per Share $ 1.23 $ (1.23 ) $ 2.08 $ (0.23 ) Items impacting comparability: Impairment of oil and gas properties, net of tax (E&P) — 1.49 0.60 1.49 Gain on sale of timber properties, net of tax (Corporate / All Other) — — (0.40 ) — Premium paid on early redemption of debt, net of tax 0.12 — 0.12 — Deferred tax valuation allowance — 0.66 — 0.66 Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) (0.01 ) 0.05 — 0.06 Adjusted Operating Results Per Share $ 1.34 $ 0.97 $ 2.40 $ 1.98 FISCAL 2021 GUIDANCE UPDATE
National Fuel is revising its fiscal 2021 earnings guidance to reflect the results of the second fiscal quarter, along with updated commodity price and operating unit cost assumptions for the balance of the year. The Company is now projecting that earnings, excluding items impacting comparability, will be within the range of $3.85 to $4.05 per share, an increase of $0.15 per share from the midpoint of the Company’s prior guidance range.
The Company is now assuming that WTI oil prices will average $60.00 per Bbl for the remainder of the year, a $7.50 increase from the $52.50 per Bbl assumed in the previous guidance. For guidance purposes, the Company’s projections approximate the current NYMEX forward markets and consider the impact of local sales point differentials and new physical firm sales, transportation, and financial hedge contracts.
Seneca currently has firm sales contracts in place for 142 Bcf, or approximately 95% of its projected remaining fiscal 2021 Appalachian production, limiting its exposure to in-basin markets. Approximately 132 Bcf of those sales, or 88% of Seneca’s expected remaining Appalachian production, are either matched by a financial hedge, including a combination of swaps and no-cost collars, or were entered into at a fixed price. Additionally, Seneca has financial hedges in place for 786 Mbbl, or approximately 72%, of its expected remaining oil production for the fiscal year.
The Company’s other guidance assumptions remain largely unchanged from the previous guidance. Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2021 are outlined in the table on page 7.
DISCUSSION OF SECOND QUARTER RESULTS BY SEGMENT
The following earnings discussion of each operating segment for the quarter ended March 31, 2021 is summarized in a tabular form on pages 8 and 9 of this report (earnings drivers for the six months ended March 31, 2021 are summarized on pages 10 and 11). It may be helpful to refer to those tables while reviewing this discussion.
Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.
Upstream Business
Exploration and Production Segment
The Exploration and Production segment operations are carried out by Seneca Resources Company, LLC ("Seneca"). Seneca explores for, develops and produces natural gas and oil reserves, primarily in Pennsylvania and California.
Three Months Ended March 31, (in thousands) 2021 2020 Variance GAAP Earnings $ 36,822 $ (175,275 ) $ 212,097 Premium paid on early redemption of debt, net of tax 10,710 — 10,710 Impairment of oil and gas properties, net of tax — 129,258 (129,258 ) Deferred tax valuation allowance — 60,463 (60,463 ) Adjusted Operating Results $ 47,532 $ 14,446 $ 33,086 Adjusted EBITDA $ 127,146 $ 79,846 $ 47,300 Seneca’s second quarter GAAP earnings increased $212.1 million versus the prior year. This was primarily attributable to the non-recurrence of two items from the prior year's second quarter, including a non-cash ceiling test impairment charge of $129.3 million (after-tax) as well as a $60.5 million state income tax valuation allowance. Excluding these items noted above, as well as a loss of $14.8 million ($10.7 million after-tax) recognized on the early redemption of long-term debt for Seneca's share of a premium paid by the Company to redeem $500 million of the Company's 4.9% notes that were scheduled to mature in December 2021, Seneca’s second quarter earnings increased $33.1 million.
Seneca produced 85.2 Bcfe during the second quarter, an increase of 25.5 Bcfe, or 43%, from the prior year. The increase was primarily driven by higher natural gas production from the Company's fourth quarter fiscal 2020 acquisition of Appalachian upstream assets, as well as production growth from Seneca's other core development areas. Net production increased 21.2 Bcf to 50.2 Bcf in the Eastern Development Area ("EDA"), primarily due to higher production from the acquisition. Net production increased 4.6 Bcf to 31.3 Bcf in Seneca’s Western Development Area ("WDA"), primarily due to the ongoing development program in the region. Oil production for the second quarter decreased 44,000 Bbls, or 7%, from the prior year primarily due to natural production declines in Seneca's Midway Sunset, Lost Hills and Pioneer development areas as a result of lower activity in response to decreased crude oil prices. These declines were partially offset by new production brought on-line in Seneca’s Coalinga and 17N development areas.
Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.28 per Mcf, an increase of $0.16 per Mcf from the prior year. This increase was primarily due to higher NYMEX prices and higher spot prices at local sales points in Pennsylvania. Seneca's average realized oil price, after the impact of hedging, was $57.11 per Bbl, a decrease of $1.12 per Bbl compared to the prior year.
Lease operating and transportation (“LOE”) expense increased $15.3 million primarily due to higher transportation costs in Appalachia from increased production. LOE expense includes $49.6 million in intercompany expense for gathering and compression services used to connect Seneca’s Marcellus and Utica production to sales points along interstate pipelines. DD&A expense increased $1.0 million due largely to higher natural gas production, partially offset by the impact of ceiling test impairments recorded during fiscal 2020.
On a unit of production basis, Seneca's combined general and administrative ("G&A"), LOE, other operation and maintenance ("O&M") expense, and Property, Franchise, and Other Taxes decreased $0.18 per Mcfe, or 14%, during the quarter.
Excluding the premium paid on the early redemption of long-term debt noted above, interest expense increased by $1.3 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Company's Appalachian acquisition. The increase in Seneca's effective income tax rate was largely driven by an increase to a valuation allowance for deferred tax assets that was initially established in the second quarter of fiscal 2020.
Midstream Businesses
Pipeline and Storage Segment
The Pipeline and Storage segment’s operations are carried out by National Fuel Gas Supply Corporation (“Supply Corporation”) and Empire Pipeline, Inc. (“Empire”). The Pipeline and Storage segment provides natural gas transportation and storage services to affiliated and non-affiliated companies through an integrated system of pipelines and underground natural gas storage fields in western New York and Pennsylvania.
Three Months Ended March 31, (in thousands) 2021 2020 Variance GAAP Earnings $ 24,928 $ 22,087 $ 2,841 Adjusted EBITDA $ 58,570 $ 49,102 $ 9,468 The Pipeline and Storage segment’s second quarter GAAP earnings increased $2.8 million versus the prior year primarily due to higher operating revenues and lower O&M expense, partially offset by higher DD&A expense and higher interest expense. The increase in operating revenues of $7.5 million, or 9%, was largely due to new demand charges for transportation service from the Company's Empire North expansion project, which was placed in service near the end of the fourth quarter of fiscal 2020, coupled with an increase in Supply Corporation's transportation and storage rates effective February 1, 2020, in accordance with Supply Corporation's rate case settlement. Additionally, the Company recognized increased revenue from a surcharge mechanism for power costs related to electric motor drive compression on the Empire North project, for which offsetting O&M expense was recognized during the quarter. O&M expense decreased $2.3 million primarily due to a decrease in the reserve for preliminary project costs, which was partially offset by an increase in operating costs, largely the aforementioned Empire power costs. The increase in DD&A expense of $2.4 million was primarily attributable to incremental depreciation from the Empire North expansion project combined with an increase in Supply Corporation's depreciation rates associated with its rate case settlement. The increase in interest expense of $3.4 million was primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020.
Gathering Segment
The Gathering segment’s operations are carried out by National Fuel Gas Midstream Company, LLC’s limited liability companies. The Gathering segment constructs, owns and operates natural gas gathering pipelines and compression facilities in the Appalachian region, which primarily delivers Seneca’s gross Appalachian production to the interstate pipeline system.
Three Months Ended March 31, (in thousands) 2021 2020 Variance GAAP Earnings $ 20,700 $ 19,898 $ 802 Premium paid on early redemption of debt, net of tax 684 — 684 Deferred tax valuation allowance — (3,769 ) 3,769 Adjusted Operating Results $ 21,384 $ 16,129 $ 5,255 Adjusted EBITDA $ 41,424 $ 29,541 $ 11,883 The Gathering segment’s second quarter GAAP earnings increased $0.8 million versus the prior year. Excluding a $3.8 million income tax benefit that was recorded as an offset to the valuation allowance recognized by the Exploration and Production segment during the prior year second quarter that did not recur in the current quarter, as well as a $0.7 million after-tax loss recognized on the early redemption of long-term debt for Midstream Company's share of a premium paid by the Company to redeem $500 million of the Company's 4.9% notes that were scheduled to mature in December 2021, the Gathering segment's earnings increased $5.3 million.
The Gathering segment's earnings increase was primarily driven by higher operating revenues, which was partially offset by higher DD&A expense, higher O&M expenses and higher interest expense. Operating revenues increased $15.0 million, or 43%, primarily due to increased gathering throughput resulting from the Company's Appalachian acquisition in the fourth quarter of fiscal 2020 and from new Marcellus and Utica wells that were brought on-line. The increase in DD&A expense of $2.8 million was primarily attributable to incremental depreciation expense related to the Company's Appalachian acquisition, as well as higher average depreciable plant in service compared to the prior year. Compression leasing expenses, as well as higher facility and personnel costs, all associated with the Appalachian acquisition, were primarily responsible for the $3.1 million increase in O&M expense. Excluding the premium paid on the early redemption of long-term debt noted above, interest expense increased by $2.1 million from the prior year, primarily driven by additional long-term borrowings from the Company's long-term debt issuance in June 2020 that was used to fund a portion of the Appalachian acquisition.
Downstream Businesses
Utility Segment
The Utility segment operations are carried out by National Fuel Gas Distribution Corporation (“Distribution”), which sells or transports natural gas to customers located in western New York and northwestern Pennsylvania.
Three Months Ended March 31, (in thousands) 2021 2020 Variance GAAP Earnings $ 32,044 $ 31,499 $ 545 Adjusted EBITDA $ 73,885 $ 73,192 $ 693 The Utility segment’s second quarter GAAP earnings increased $0.5 million versus the prior year primarily due to higher customer margins (operating revenues less purchased gas sold), partially offset by higher O&M expense. The increase in customer margin was due primarily to higher revenues earned through the Company's system modernization tracking mechanism in its New York service territory and colder weather in Distribution's Pennsylvania service territory that resulted in an increase in customer usage. These positive items were partially offset by the impact of adjustments recorded in the prior year for certain regulatory revenue and cost recovery mechanisms that did not occur in the current year. Weather in Distribution's Pennsylvania service territory was 8% colder on average than last year. The impact of weather variations on earnings in Distribution's New York service territory is largely mitigated by that jurisdiction's weather normalization clause. The $1.8 million increase in O&M expense was primarily attributable to incremental expense recorded to increase the allowance for uncollectible accounts due to the potential for higher customer non-payment resulting from the current economic backdrop brought on by COVID-19, as well as higher personnel costs.
Corporate and All Other
The Company’s operations that are included in Corporate and All Other generated a combined net loss of $2.1 million in the current year second quarter, which was $2.2 million lower than the combined loss of $4.3 million in the prior-year second quarter. The reduction in net loss was primarily driven by unrealized gains on investment securities recognized in the current quarter compared to unrealized losses on investment securities in the prior year second quarter.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, May 7, 2021, at 11 a.m. Eastern Time to discuss this announcement. Pre-registration is required to access the teleconference by phone in a listen-only mode by following this link: http://www.directeventreg.com/registration/event/2524688. To access the webcast, visit the Events Calendar under the News & Events page on the NFG Investor Relations website at investor.nationalfuelgas.com. A replay of the conference call will be available approximately two hours following the teleconference at the same website link and by phone (toll-free) at 800-585-8367 using conference ID number “2524688”. Both the webcast and conference call replay will be available until the close of business on Friday, May 14, 2021.
National Fuel is an integrated energy company reporting financial results for four operating segments: Exploration and Production, Pipeline and Storage, Gathering, and Utility. Additional information about National Fuel is available at www.nationalfuelgas.com.
Analyst Contact: Kenneth E. 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: the length and severity of the recent COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity; changes in economic conditions, including global, national or regional recessions, and their effect on the demand for, and customers’ ability to pay for, the Company’s products and services; changes in the price of natural gas or oil; impairments under the SEC’s full cost ceiling test for natural gas and oil reserves; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; financial and economic conditions, including the availability of credit, and occurrences affecting the Company’s ability to obtain financing on acceptable terms for working capital, capital expenditures and other investments, including any downgrades in the Company’s credit ratings and changes in interest rates and other capital market conditions; changes in laws, regulations or judicial interpretations to which the Company is subject, including those involving derivatives, taxes, safety, employment, climate change, other environmental matters, real property, and exploration and production activities such as hydraulic fracturing; the Company's ability to estimate accurately the time and resources necessary to meet emissions targets; disallowance by applicable regulatory bodies of appropriate rate recovery for system modernization; moves to reduce or eliminate reliance on natural gas; delays or changes in costs or plans with respect to Company projects or related projects of other companies, including disruptions due to the COVID-19 pandemic, as well as difficulties or delays in obtaining necessary governmental approvals, permits or orders or in obtaining the cooperation of interconnecting facility operators; the Company's ability to complete planned strategic transactions; the Company's ability to successfully integrate acquired assets and achieve expected cost synergies; governmental/regulatory actions, initiatives and proceedings, including those involving rate cases (which address, among other things, target rates of return, rate design and retained natural gas), environmental/safety requirements, affiliate relationships, industry structure, and franchise renewal; changes in price differentials between similar quantities of natural gas or oil sold at different geographic locations, and the effect of such changes on commodity production, revenues and demand for pipeline transportation capacity to or from such locations; the impact of information technology disruptions, cybersecurity or data security breaches; factors affecting the Company’s ability to successfully identify, drill for and produce economically viable natural gas and oil reserves, including among others geology, lease availability, title disputes, weather conditions, shortages, delays or unavailability of equipment and services required in drilling operations, insufficient gathering, processing and transportation capacity, the need to obtain governmental approvals and permits, and compliance with environmental laws and regulations; increasing health care costs and the resulting effect on health insurance premiums and on the obligation to provide other post-retirement benefits; other changes in price differentials between similar quantities of natural gas or oil having different quality, heating value, hydrocarbon mix or delivery date; the cost and effects of legal and administrative claims against the Company or activist shareholder campaigns to effect changes at the Company; uncertainty of oil and gas reserve estimates; significant differences between the Company’s projected and actual production levels for natural gas or oil; changes in demographic patterns and weather conditions; changes in the availability, price or accounting treatment of derivative financial instruments; changes in laws, actuarial assumptions, the interest rate environment and the return on plan/trust assets related to the Company’s pension and other post-retirement benefits, which can affect future funding obligations and costs and plan liabilities; economic disruptions or uninsured losses resulting from major accidents, fires, severe weather, natural disasters, terrorist activities or acts of war; significant differences between the Company’s projected and actual capital expenditures and operating expenses; or increasing costs of insurance, changes in coverage and the ability to obtain insurance. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date thereof.
NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIESGUIDANCE SUMMARY
As discussed on page 2, the Company is revising its earnings guidance for fiscal 2021. Additional details on the Company's forecast assumptions and business segment guidance are outlined in the table below.
The revised earnings guidance range does not include the impact of certain items that impacted the comparability of earnings during the six months ended March 31, 2021, including: (1) the after-tax impairment of oil and gas properties, which reduced earnings by $0.60 per share; (2) the after-tax gain on sale of timber properties, which increased earnings by $0.40 per share; and (3) the after-tax premium paid on early redemption of debt, which reduced earnings by $0.12 per share. While the Company expects to record certain adjustments to unrealized gain or loss on investments during the six months ending September 30, 2021, the amounts of these and other potential adjustments are not reasonably determinable at this time. As such, the Company is unable to provide earnings guidance other than on a non-GAAP basis.
Updated FY 2021 Guidance Previous FY 2021 Guidance Consolidated Earnings per Share, excluding items impacting comparability $3.85 to $4.05 $3.65 to $3.95 Consolidated Effective Tax Rate ~ 26% ~ 26% Capital Expenditures (Millions) Exploration and Production $350 - $390 $350 - $390 Pipeline and Storage $250 - $300 $250 - $300 Gathering $30 - $40 $30 - $40 Utility $90 - $100 $90 - $100 Consolidated Capital Expenditures $720 - $830 $720 - $830 Exploration & Production Segment Guidance* Commodity Price Assumptions NYMEX natural gas price $2.75 /MMBtu $2.75 /MMBtu Appalachian basin spot price $1.90 /MMBtu $2.05 /MMBtu NYMEX (WTI) crude oil price $60.00 /Bbl $52.50 /Bbl California oil price premium (% of WTI) 96% 96% Production (Bcfe) East Division - Appalachia 300 to 315 295 to 320 West Division - California ~ 15 ~ 15 Total Production 315 to 330 310 to 335 E&P Operating Costs ($/Mcfe) LOE $0.82 - $0.84 $0.83 - $0.85 G&A $0.20 - $0.22 $0.20 - $0.22 DD&A $0.57 - $0.60 $0.58 - $0.62 Other Business Segment Guidance (Millions) Gathering Segment Revenues $185 - $200 $185 - $200 Pipeline and Storage Segment Revenues $335 - $345 $330 - $340 * Commodity price assumptions are for the remaining 6 months of the fiscal year. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED MARCH 31, 2021 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Second quarter 2020 GAAP earnings $ (175,275 ) $ 22,087 $ 19,898 $ 31,499 $ (4,277 ) $ (106,068 ) Items impacting comparability: Impairment of oil and gas properties 177,761 177,761 Tax impact of impairment of oil and gas properties (48,503 ) (48,503 ) Deferred tax valuation allowance 60,463 (3,769 ) 76 56,770 Unrealized (gain) loss on other investments 5,414 5,414 Tax impact of unrealized (gain) loss on other investments (1,137 ) (1,137 ) Second quarter 2020 adjusted operating results 14,446 22,087 16,129 31,499 76 84,237 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 43,199 43,199 Higher (lower) crude oil production (2,058 ) (2,058 ) Higher (lower) realized natural gas prices, after hedging 10,040 10,040 Higher (lower) realized crude oil prices, after hedging (498 ) (498 ) Midstream and All Other Revenues Higher (lower) operating revenues 5,893 11,846 (670 ) 17,069 Downstream Margins*** Impact of usage and weather 1,484 1,484 System modernization tracker revenues 1,562 1,562 Regulatory revenue adjustments (1,226 ) (1,226 ) Higher (lower) energy marketing margins (2,328 ) (2,328 ) Operating Expenses Lower (higher) lease operating and transportation expenses (12,070 ) (12,070 ) Lower (higher) operating expenses (711 ) 1,814 (2,473 ) (1,357 ) 1,352 (1,375 ) Lower (higher) property, franchise and other taxes (907 ) (907 ) Lower (higher) depreciation / depletion (792 ) (1,875 ) (2,225 ) (4,892 ) Other Income (Expense) (Higher) lower other deductions (377 ) 359 (18 ) (Higher) lower interest expense (1,017 ) (2,686 ) (1,629 ) (720 ) (6,052 ) Income Taxes Lower (higher) income tax expense / effective tax rate (2,447 ) 157 (217 ) 191 (1,074 ) (3,390 ) All other / rounding 347 (85 ) (47 ) (109 ) 277 383 Second quarter 2021 adjusted operating results 47,532 24,928 21,384 32,044 (2,728 ) 123,160 Items impacting comparability: Premium paid on early redemption of debt (14,772 ) (943 ) (15,715 ) Tax impact of premium paid on early redemption of debt 4,062 259 4,321 Unrealized gain (loss) on other investments 848 848 Tax impact of unrealized gain (loss) on other investments (178 ) (178 ) Second quarter 2021 GAAP earnings $ 36,822 $ 24,928 $ 20,700 $ 32,044 $ (2,058 ) $ 112,436 * Amounts do not reflect intercompany eliminations. ** Drivers of operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE QUARTER ENDED MARCH 31, 2021 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Second quarter 2020 GAAP earnings per share $ (2.03 ) $ 0.26 $ 0.23 $ 0.36 $ (0.05 ) $ (1.23 ) Items impacting comparability: Impairment of oil and gas properties, net of tax 1.49 1.49 Deferred tax valuation allowance 0.70 (0.04 ) — 0.66 Unrealized (gain) loss on other investments, net of tax 0.05 0.05 Earnings per share impact of diluted shares 0.01 (0.01 ) — Second quarter 2020 adjusted operating results per share 0.17 0.25 0.19 0.36 — 0.97 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.47 0.47 Higher (lower) crude oil production (0.02 ) (0.02 ) Higher (lower) realized natural gas prices, after hedging 0.11 0.11 Higher (lower) realized crude oil prices, after hedging (0.01 ) (0.01 ) Midstream and All Other Revenues Higher (lower) operating revenues 0.06 0.13 (0.01 ) 0.18 Downstream Margins*** Impact of usage and weather 0.02 0.02 System modernization tracker revenues 0.02 0.02 Regulatory revenue adjustments (0.01 ) (0.01 ) Higher (lower) energy marketing margins (0.03 ) (0.03 ) Operating Expenses Lower (higher) lease operating and transportation expenses (0.13 ) (0.13 ) Lower (higher) operating expenses (0.01 ) 0.02 (0.03 ) (0.01 ) 0.01 (0.02 ) Lower (higher) property, franchise and other taxes (0.01 ) (0.01 ) Lower (higher) depreciation / depletion (0.01 ) (0.02 ) (0.02 ) (0.05 ) Other Income (Expense) (Higher) lower other deductions — — — (Higher) lower interest expense (0.01 ) (0.03 ) (0.02 ) (0.01 ) (0.07 ) Income Taxes Lower (higher) income tax expense / effective tax rate (0.03 ) — — — (0.01 ) (0.04 ) Impact of additional shares (0.01 ) (0.01 ) (0.01 ) (0.02 ) — (0.05 ) All other / rounding 0.01 — (0.01 ) (0.01 ) 0.02 0.01 Second quarter 2021 adjusted operating results per share 0.52 0.27 0.23 0.35 (0.03 ) 1.34 Items impacting comparability: Premium paid on early redemption of debt, net of tax (0.12 ) — (0.12 ) Unrealized gain (loss) on other investments, net of tax 0.01 0.01 Second quarter 2021 GAAP earnings per share $ 0.40 $ 0.27 $ 0.23 $ 0.35 $ (0.02 ) $ 1.23 * Amounts do not reflect intercompany eliminations. ** Drivers of operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS SIX MONTHS ENDED MARCH 31, 2021 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Six months ended March 31, 2020 GAAP earnings $ (151,299 ) $ 40,192 $ 35,842 $ 58,082 $ (2,294 ) $ (19,477 ) Items impacting comparability: Impairment of oil and gas properties 177,761 177,761 Tax impact of impairment of oil and gas properties (48,503 ) (48,503 ) Deferred tax valuation allowance 60,463 (3,769 ) 76 56,770 Unrealized (gain) loss on other investments 6,433 6,433 Tax impact of unrealized (gain) loss on other investments (1,351 ) (1,351 ) Six months ended March 31, 2020 adjusted operating results 38,422 40,192 32,073 58,082 2,864 171,633 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 82,667 82,667 Higher (lower) crude oil production (3,955 ) (3,955 ) Higher (lower) realized natural gas prices, after hedging (1,564 ) (1,564 ) Higher (lower) realized crude oil prices, after hedging (6,277 ) (6,277 ) Midstream and All Other Revenues Higher (lower) operating revenues 18,173 21,500 (1,123 ) 38,550 Downstream Margins*** Impact of usage and weather 321 321 System modernization tracker revenues 2,481 2,481 Regulatory revenue adjustments (1,018 ) (1,018 ) Higher (lower) energy marketing margins (4,668 ) (4,668 ) Operating Expenses Lower (higher) lease operating and transportation expenses (23,745 ) (23,745 ) Lower (higher) operating expenses (2,519 ) 1,623 (3,943 ) (3,313 ) 2,129 (6,023 ) Lower (higher) property, franchise and other taxes (706 ) (706 ) Lower (higher) depreciation / depletion (1,728 ) (4,927 ) (4,411 ) (729 ) (11,795 ) Other Income (Expense) (Higher) lower other deductions (888 ) 1,572 684 (Higher) lower interest expense (2,149 ) (5,545 ) (3,123 ) (1,067 ) (11,884 ) Income Taxes Lower (higher) income tax expense / effective tax rate (5,609 ) 457 (235 ) (1,167 ) 1,233 (5,321 ) All other / rounding 244 27 73 424 (13 ) 755 Six months ended March 31, 2021 adjusted operating results 73,081 49,112 41,934 55,081 927 220,135 Items impacting comparability: Impairment of oil and gas properties (76,152 ) (76,152 ) Tax impact of impairment of oil and gas properties 20,980 20,980 Gain on sale of timber properties 51,066 51,066 Tax impact of gain on sale of timber properties (14,069 ) (14,069 ) Premium paid on early redemption of debt (14,772 ) (943 ) (15,715 ) Tax impact of premium paid on early redemption of debt 4,062 259 4,321 Unrealized gain (loss) on other investments (450 ) (450 ) Tax impact of unrealized gain (loss) on other investments 94 94 Six months ended March 31, 2021 GAAP earnings $ 7,199 $ 49,112 $ 41,250 $ 55,081 $ 37,568 $ 190,210 * Amounts do not reflect intercompany eliminations. ** Operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS PER SHARE SIX MONTHS ENDED MARCH 31, 2021 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Six months ended March 31, 2020 GAAP earnings per share $ (1.75 ) $ 0.46 $ 0.42 $ 0.67 $ (0.03 ) $ (0.23 ) Items impacting comparability: Impairment of oil and gas properties, net of tax 1.49 1.49 Deferred tax valuation allowance 0.70 (0.04 ) — 0.66 Unrealized (gain) loss on other investments, net of tax 0.06 0.06 Earnings per share impact of diluted shares (0.01 ) 0.01 — Six months ended March 31, 2020 adjusted operating results per share 0.44 0.46 0.37 0.67 0.04 1.98 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.90 0.90 Higher (lower) crude oil production (0.04 ) (0.04 ) Higher (lower) realized natural gas prices, after hedging (0.02 ) (0.02 ) Higher (lower) realized crude oil prices, after hedging (0.07 ) (0.07 ) Midstream and All Other Revenues Higher (lower) operating revenues 0.20 0.23 (0.01 ) 0.42 Downstream Margins*** Impact of usage and weather — — System modernization tracker revenues 0.03 0.03 Regulatory revenue adjustments (0.01 ) (0.01 ) Higher (lower) energy marketing margins (0.05 ) (0.05 ) Operating Expenses Lower (higher) lease operating and transportation expenses (0.26 ) (0.26 ) Lower (higher) operating expenses (0.03 ) 0.02 (0.04 ) (0.04 ) 0.02 (0.07 ) Lower (higher) property, franchise and other taxes (0.01 ) (0.01 ) Lower (higher) depreciation / depletion (0.02 ) (0.05 ) (0.05 ) (0.01 ) (0.13 ) Other Income (Expense) (Higher) lower other deductions (0.01 ) 0.02 0.01 (Higher) lower interest expense (0.02 ) (0.06 ) (0.03 ) (0.01 ) (0.12 ) Income Taxes Lower (higher) income tax expense / effective tax rate (0.06 ) — — (0.01 ) 0.01 (0.06 ) Impact of additional shares (0.02 ) (0.02 ) (0.02 ) (0.04 ) — (0.10 ) All other / rounding 0.01 — (0.01 ) 0.01 (0.01 ) — Six months ended March 31, 2021 adjusted operating results per share 0.80 0.54 0.45 0.60 0.01 2.40 Items impacting comparability: Impairment of oil and gas properties, net of tax (0.60 ) (0.60 ) Gain on sale of timber properties, net of tax 0.40 0.40 Premium paid on early redemption of debt, net of tax (0.12 ) — (0.12 ) Unrealized gain (loss) on other investments, net of tax — — Six months ended March 31, 2021 GAAP earnings per share $ 0.08 $ 0.54 $ 0.45 $ 0.60 $ 0.41 $ 2.08 * Amounts do not reflect intercompany eliminations. ** Operating results have been calculated using the 21% federal statutory rate. *** Downstream margin defined as operating revenues less purchased gas expense. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES (Thousands of Dollars, except per share amounts) Three Months Ended Six Months Ended March 31, March 31, (Unaudited) (Unaudited) SUMMARY OF OPERATIONS 2021 2020 2021 2020 Operating Revenues: Utility and Energy Marketing Revenues $ 270,849 $ 282,634 $ 460,315 $ 510,660 Exploration and Production and Other Revenues 220,281 156,542 412,316 323,735 Pipeline and Storage and Gathering Revenues 59,985 51,919 119,644 100,888 551,115 491,095 992,275 935,283 Operating Expenses: Purchased Gas 106,661 118,270 158,280 210,542 Operation and Maintenance: Utility and Energy Marketing 52,058 51,725 96,944 94,981 Exploration and Production and Other 41,895 39,959 83,922 76,652 Pipeline and Storage and Gathering 28,133 27,305 56,231 53,190 Property, Franchise and Other Taxes 23,987 22,743 46,768 45,887 Depreciation, Depletion and Amortization 84,342 77,912 167,462 152,830 Impairment of Oil and Gas Producing Properties — 177,761 76,152 177,761 337,076 515,675 685,759 811,843 Gain on Sale of Timber Properties — — 51,066 — Operating Income (Loss) 214,039 (24,580 ) 357,582 123,440 Other Income (Expense): Other Income (Deductions) (10,875 ) (17,480 ) (13,051 ) (20,520 ) Interest Expense on Long-Term Debt (48,820 ) (25,270 ) (81,076 ) (50,713 ) Other Interest Expense (1,698 ) (1,892 ) (3,618 ) (3,443 ) Income (Loss) Before Income Taxes 152,646 (69,222 ) 259,837 48,764 Income Tax Expense 40,210 36,846 69,627 68,241 Net Income (Loss) Available for Common Stock $ 112,436 $ (106,068 ) $ 190,210 $ (19,477 ) Earnings (Loss) Per Common Share Basic $ 1.23 $ (1.23 ) $ 2.09 $ (0.23 ) Diluted $ 1.23 $ (1.23 ) $ 2.08 $ (0.23 ) Weighted Average Common Shares: Used in Basic Calculation 91,163,291 86,561,066 91,084,620 86,469,258 Used in Diluted Calculation 91,645,679 86,561,066 91,581,918 86,469,258 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, September 30, (Thousands of Dollars) 2021 2020 ASSETS Property, Plant and Equipment $ 12,648,604 $ 12,351,852 Less - Accumulated Depreciation, Depletion and Amortization 6,572,534 6,353,785 Net Property, Plant and Equipment 6,076,070 5,998,067 Assets Held for Sale, Net — 53,424 Current Assets: Cash and Temporary Cash Investments 80,467 20,541 Receivables - Net 229,479 143,583 Unbilled Revenue 32,685 17,302 Gas Stored Underground 5,745 33,338 Materials, Supplies and Emission Allowances 52,212 51,877 Unrecovered Purchased Gas Costs 479 — Other Current Assets 56,117 47,557 Total Current Assets 457,184 314,198 Other Assets: Recoverable Future Taxes 117,300 118,310 Unamortized Debt Expense 11,443 12,297 Other Regulatory Assets 147,099 156,106 Deferred Charges 60,454 67,131 Other Investments 147,421 154,502 Goodwill 5,476 5,476 Prepaid Post-Retirement Benefit Costs 89,101 76,035 Fair Value of Derivative Financial Instruments 4,104 9,308 Other — 81 Total Other Assets 582,398 599,246 Total Assets $ 7,115,652 $ 6,964,935 CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 91,163,797 Shares and 90,954,696 Shares, Respectively $ 91,164 $ 90,955 Paid in Capital 1,009,075 1,004,158 Earnings Reinvested in the Business 1,100,718 991,630 Accumulated Other Comprehensive Loss (101,988 ) (114,757 ) Total Comprehensive Shareholders' Equity 2,098,969 1,971,986 Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,627,033 2,629,576 Total Capitalization 4,726,002 4,601,562 Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper — 30,000 Current Portion of Long-Term Debt — — Accounts Payable 107,305 134,126 Amounts Payable to Customers 19,768 10,788 Dividends Payable 40,562 40,475 Interest Payable on Long-Term Debt 17,663 27,521 Customer Advances — 15,319 Customer Security Deposits 19,503 17,199 Other Accruals and Current Liabilities 176,940 140,176 Fair Value of Derivative Financial Instruments 21,231 43,969 Total Current and Accrued Liabilities 402,972 459,573 Deferred Credits: Deferred Income Taxes 763,441 696,054 Taxes Refundable to Customers 355,375 357,508 Cost of Removal Regulatory Liability 237,867 230,079 Other Regulatory Liabilities 177,685 161,573 Pension and Other Post-Retirement Liabilities 118,804 127,181 Asset Retirement Obligations 192,127 192,228 Other Deferred Credits 141,379 139,177 Total Deferred Credits 1,986,678 1,903,800 Commitments and Contingencies — — Total Capitalization and Liabilities $ 7,115,652 $ 6,964,935 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended March 31, (Thousands of Dollars) 2021 2020 Operating Activities: Net Income (Loss) Available for Common Stock $ 190,210 $ (19,477 ) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: Gain on Sale of Timber Properties (51,066 ) — Impairment of Oil and Gas Producing Properties 76,152 177,761 Depreciation, Depletion and Amortization 167,462 152,830 Deferred Income Taxes 61,408 104,883 Premium Paid on Early Redemption of Debt 15,715 — Stock-Based Compensation 8,657 7,580 Other 6,742 9,800 Change in: Receivables and Unbilled Revenue (101,159 ) (58,248 ) Gas Stored Underground and Materials, Supplies and Emission Allowances 27,258 20,086 Unrecovered Purchased Gas Costs (479 ) 2,246 Other Current Assets (8,447 ) (3,134 ) Accounts Payable 8,613 (5,465 ) Amounts Payable to Customers 8,980 13,196 Customer Advances (15,319 ) (12,429 ) Customer Security Deposits 2,304 (1,211 ) Other Accruals and Current Liabilities 9,058 9,076 Other Assets 11,039 (10,359 ) Other Liabilities 5 3,857 Net Cash Provided by Operating Activities $ 417,133 $ 390,992 Investing Activities: Capital Expenditures $ (338,867 ) $ (395,486 ) Net Proceeds from Sale of Timber Properties 104,582 — Other 12,095 4,167 Net Cash Used in Investing Activities $ (222,190 ) $ (391,319 ) Financing Activities: Changes in Notes Payable to Banks and Commercial Paper $ (30,000 ) $ 174,800 Reduction of Long-Term Debt (515,715 ) — Dividends Paid on Common Stock (81,035 ) (75,197 ) Net Proceeds From Issuance of Long-Term Debt 495,267 — Net Repurchases of Common Stock (3,534 ) (4,153 ) Net Cash Provided by (Used in) Financing Activities $ (135,017 ) $ 95,450 Net Increase in Cash, Cash Equivalents, and Restricted Cash 59,926 95,123 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 20,541 27,260 Cash, Cash Equivalents, and Restricted Cash at March 31 $ 80,467 $ 122,383 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) UPSTREAM BUSINESS Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31, EXPLORATION AND PRODUCTION SEGMENT 2021 2020 Variance 2021 2020 Variance Total Operating Revenues $ 220,187 $ 155,560 $ 64,627 $ 411,582 $ 321,499 $ 90,083 Operating Expenses: Operation and Maintenance: General and Administrative Expense 17,899 17,429 470 34,852 32,809 2,043 Lease Operating and Transportation Expense 67,008 51,730 15,278 132,588 102,531 30,057 All Other Operation and Maintenance Expense 3,515 3,084 431 7,187 6,041 1,146 Property, Franchise and Other Taxes 4,619 3,471 1,148 9,065 8,171 894 Depreciation, Depletion and Amortization 46,139 45,136 1,003 91,471 89,284 2,187 Impairment of Oil and Gas Producing Properties — 177,761 (177,761 ) 76,152 177,761 (101,609 ) 139,180 298,611 (159,431 ) 351,315 416,597 (65,282 ) Operating Income (Loss) 81,007 (143,051 ) 224,058 60,267 (95,098 ) 155,365 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (286 ) (395 ) 109 (570 ) (790 ) 220 Interest and Other Income 67 208 (141 ) 158 441 (283 ) Interest Expense on Long-Term Debt (15,119 ) — (15,119 ) (15,119 ) — (15,119 ) Interest Expense (15,103 ) (14,163 ) (940 ) (30,594 ) (28,220 ) (2,374 ) Income (Loss) Before Income Taxes 50,566 (157,401 ) 207,967 14,142 (123,667 ) 137,809 Income Tax Expense 13,744 17,874 (4,130 ) 6,943 27,632 (20,689 ) Net Income (Loss) $ 36,822 $ (175,275 ) $ 212,097 $ 7,199 $ (151,299 ) $ 158,498 Net Income (Loss) Per Share (Diluted) $ 0.40 $ (2.03 ) $ 2.43 $ 0.08 $ (1.75 ) $ 1.83 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) MIDSTREAM BUSINESSES Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31, PIPELINE AND STORAGE SEGMENT 2021 2020 Variance 2021 2020 Variance Revenues from External Customers $ 59,314 $ 51,919 $ 7,395 $ 118,623 $ 100,888 $ 17,735 Intersegment Revenues 27,390 27,326 64 55,846 50,577 5,269 Total Operating Revenues 86,704 79,245 7,459 174,469 151,465 23,004 Operating Expenses: Purchased Gas 216 (3 ) 219 229 (10 ) 239 Operation and Maintenance 19,718 22,014 (2,296 ) 40,891 42,945 (2,054 ) Property, Franchise and Other Taxes 8,200 8,132 68 16,643 16,487 156 Depreciation, Depletion and Amortization 15,729 13,356 2,373 31,197 24,960 6,237 43,863 43,499 364 88,960 84,382 4,578 Operating Income 42,841 35,746 7,095 85,509 67,083 18,426 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit (Costs) Credit 125 (174 ) 299 250 (349 ) 599 Interest and Other Income 939 1,535 (596 ) 1,795 3,088 (1,293 ) Interest Expense (10,552 ) (7,152 ) (3,400 ) (21,283 ) (14,264 ) (7,019 ) Income Before Income Taxes 33,353 29,955 3,398 66,271 55,558 10,713 Income Tax Expense 8,425 7,868 557 17,159 15,366 1,793 Net Income $ 24,928 $ 22,087 $ 2,841 $ 49,112 $ 40,192 $ 8,920 Net Income Per Share (Diluted) $ 0.27 $ 0.26 $ 0.01 $ 0.54 $ 0.46 $ 0.08 Three Months Ended Six Months Ended March 31, March 31, GATHERING SEGMENT 2021 2020 Variance 2021 2020 Variance Revenues from External Customers $ 671 $ — $ 671 $ 1,021 $ — $ 1,021 Intersegment Revenues 49,591 35,267 14,324 96,249 70,055 26,194 Total Operating Revenues 50,262 35,267 14,995 97,270 70,055 27,215 Operating Expenses: Operation and Maintenance 8,833 5,702 3,131 16,035 11,044 4,991 Property, Franchise and Other Taxes 5 24 (19 ) 18 38 (20 ) Depreciation, Depletion and Amortization 8,096 5,279 2,817 16,001 10,418 5,583 16,934 11,005 5,929 32,054 21,500 10,554 Operating Income 33,328 24,262 9,066 65,216 48,555 16,661 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (68 ) (71 ) 3 (135 ) (143 ) 8 Interest and Other Income 9 89 (80 ) 243 157 86 Interest Expense on Long-Term Debt (965 ) — (965 ) (965 ) — (965 ) Interest Expense (4,201 ) (2,160 ) (2,041 ) (8,332 ) (4,379 ) (3,953 ) Income Before Income Taxes 28,103 22,120 5,983 56,027 44,190 11,837 Income Tax Expense 7,403 2,222 5,181 14,777 8,348 6,429 Net Income $ 20,700 $ 19,898 $ 802 $ 41,250 $ 35,842 $ 5,408 Net Income Per Share (Diluted) $ 0.23 $ 0.23 $ — $ 0.45 $ 0.42 $ 0.03 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) DOWNSTREAM BUSINESS Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31, UTILITY SEGMENT 2021 2020 Variance 2021 2020 Variance Revenues from External Customers $ 270,784 $ 250,556 $ 20,228 $ 459,684 $ 445,465 $ 14,219 Intersegment Revenues 97 3,937 (3,840 ) 197 5,853 (5,656 ) Total Operating Revenues 270,881 254,493 16,388 459,881 451,318 8,563 Operating Expenses: Purchased Gas 133,132 119,411 13,721 210,164 204,116 6,048 Operation and Maintenance 52,864 51,070 1,794 98,116 93,913 4,203 Property, Franchise and Other Taxes 11,000 10,820 180 20,748 20,634 114 Depreciation, Depletion and Amortization 14,311 13,751 560 28,305 27,382 923 211,307 195,052 16,255 357,333 346,045 11,288 Operating Income 59,574 59,441 133 102,548 105,273 (2,725 ) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (12,243 ) (12,388 ) 145 (18,927 ) (19,151 ) 224 Interest and Other Income 443 294 149 1,181 1,245 (64 ) Interest Expense (5,495 ) (5,516 ) 21 (10,947 ) (11,190 ) 243 Income Before Income Taxes 42,279 41,831 448 73,855 76,177 (2,322 ) Income Tax Expense 10,235 10,332 (97 ) 18,774 18,095 679 Net Income $ 32,044 $ 31,499 $ 545 $ 55,081 $ 58,082 $ (3,001 ) Net Income Per Share (Diluted) $ 0.35 $ 0.36 $ (0.01 ) $ 0.60 $ 0.67 $ (0.07 ) NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT OPERATING RESULTS AND STATISTICS (UNAUDITED) Three Months Ended Six Months Ended (Thousands of Dollars, except per share amounts) March 31, March 31, ALL OTHER 2021 2020 Variance 2021 2020 Variance Revenues from External Customers $ 64 $ 32,925 $ (32,861 ) $ 1,175 $ 67,161 $ (65,986 ) Intersegment Revenues 1 79 (78 ) 20 256 (236 ) Total Operating Revenues 65 33,004 (32,939 ) 1,195 67,417 (66,222 ) Operating Expenses: Purchased Gas 6 29,151 (29,145 ) 2,293 61,184 (58,891 ) Operation and Maintenance (81 ) 1,875 (1,956 ) 683 3,578 (2,895 ) Property, Franchise and Other Taxes 38 176 (138 ) 47 320 (273 ) Depreciation, Depletion and Amortization 9 206 (197 ) 394 408 (14 ) (28 ) 31,408 (31,436 ) 3,417 65,490 (62,073 ) Gain on Sale of Timber Properties — — — 51,066 — 51,066 Operating Income 93 1,596 (1,503 ) 48,844 1,927 46,917 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (3) (69 ) 66 (7 ) (138 ) 131 Interest and Other Income 41 193 (152 ) 225 471 (246 ) Interest Expense — (24 ) 24 — (42 ) 42 Income before Income Taxes 131 1,696 (1,565 ) 49,062 2,218 46,844 Income Tax Expense 1,114 527 587 12,485 678 11,807 Net Income (Loss) $ (983 ) $ 1,169 $ (2,152 ) $ 36,577 $ 1,540 $ 35,037 Net Income (Loss) Per Share (Diluted) $ (0.01 ) $ 0.01 $ (0.02 ) $ 0.40 $ 0.02 $ 0.38 Three Months Ended Six Months Ended March 31, March 31, CORPORATE 2021 2020 Variance 2021 2020 Variance Revenues from External Customers $ 95 $ 135 $ (40 ) $ 190 $ 270 $ (80 ) Intersegment Revenues 1,027 1,094 (67 ) 1,691 2,187 (496 ) Total Operating Revenues 1,122 1,229 (107 ) 1,881 2,457 (576 ) Operating Expenses: Operation and Maintenance 3,743 3,499 244 6,342 6,142 200 Property, Franchise and Other Taxes 125 120 5 247 237 10 Depreciation, Depletion and Amortization 58 184 (126 ) 94 378 (284 ) 3,926 3,803 123 6,683 6,757 (74 ) Operating Loss (2,804 ) (2,574 ) (230 ) (4,802 ) (4,300 ) (502 ) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (922 ) (775 ) (147 ) (1,846 ) (1,550 ) (296 ) Interest and Other Income 35,317 22,801 12,516 74,296 53,874 20,422 Interest Expense on Long-Term Debt (32,736 ) (25,270 ) (7,466 ) (64,992 ) (50,713 ) (14,279 ) Other Interest Expense (641 ) (1,605 ) 964 (2,176 ) (3,023 ) 847 Income (Loss) before Income Taxes (1,786 ) (7,423 ) 5,637 480 (5,712 ) 6,192 Income Tax Expense (Benefit) (711 ) (1,977 ) 1,266 (511 ) (1,878 ) 1,367 Net Income (Loss) $ (1,075 ) $ (5,446 ) $ 4,371 $ 991 $ (3,834 ) $ 4,825 Net Income (Loss) Per Share (Diluted) $ (0.01 ) $ (0.06 ) $ 0.05 $ 0.01 $ (0.05 ) $ 0.06 Three Months Ended Six Months Ended March 31, March 31, INTERSEGMENT ELIMINATIONS 2021 2020 Variance 2021 2020 Variance Intersegment Revenues $ (78,106 ) $ (67,703 ) $ (10,403 ) $ (154,003 ) $ (128,928 ) $ (25,075 ) Operating Expenses: Purchased Gas (26,693 ) (30,289 ) 3,596 (54,406 ) (54,748 ) 342 Operation and Maintenance (51,413 ) (37,414 ) (13,999 ) (99,597 ) (74,180 ) (25,417 ) (78,106 ) (67,703 ) (10,403 ) (154,003 ) (128,928 ) (25,075 ) Operating Income — — — — — — Other Income (Expense): Interest and Other Deductions (34,294 ) (28,728 ) (5,566 ) (69,714 ) (57,675 ) (12,039 ) Interest Expense 34,294 28,728 5,566 69,714 57,675 12,039 Net Income $ — $ — $ — $ — $ — $ — Net Income Per Share (Diluted) $ — $ — $ — $ — $ — $ — NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Continued) (Thousands of Dollars) Three Months Ended Six Months Ended March 31, March 31, (Unaudited) (Unaudited) Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Capital Expenditures: Exploration and Production $ 88,271 (1) $ 102,424 (3) $ (14,153 ) $ 169,610 (1)(2) $ 229,343 (3)(4) $ (59,733 ) Pipeline and Storage 47,970 (1) 25,554 (3) 22,416 91,693 (1)(2) 82,638 (3)(4) 9,055 Gathering 11,099 (1) 15,072 (3) (3,973 ) 19,419 (1)(2) 24,910 (3)(4) (5,491 ) Utility 24,480 (1) 19,457 (3) 5,023 41,825 (1)(2) 36,622 (3)(4) 5,203 Total Reportable Segments 171,820 162,507 9,313 322,547 373,513 (50,966 ) All Other — 1 (1 ) — 22 (22 ) Corporate 50 134 (84 ) 89 320 (231 ) Eliminations (373 ) — (373 ) (219 ) — (219 ) Total Capital Expenditures $ 171,497 $ 162,642 $ 8,855 $ 322,417 $ 373,855 $ (51,438 ) (1) Capital expenditures for the quarter and six months ended March 31, 2021, include accounts payable and accrued liabilities related to capital expenditures of $44.5 million, $16.0 million, $2.9 million, and $4.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2021, since they represent non-cash investing activities at that date. (2) Capital expenditures for the six months ended March 31, 2021, exclude capital expenditures of $45.8 million, $17.3 million, $13.5 million and $10.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2020 and paid during the six months ended March 31, 2021. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2020, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2021. (3) Capital expenditures for the quarter and six months ended March 31, 2020, include accounts payable and accrued liabilities related to capital expenditures of $41.2 million, $9.7 million, $4.4 million, and $4.2 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts have been excluded from the Consolidated Statement of Cash Flows at March 31, 2020, since they represent non-cash investing activities at that date. (4) Capital expenditures for the six months ended March 31, 2020, exclude capital expenditures of $38.0 million, $23.8 million, $6.6 million and $12.7 million in the Exploration and Production segment, Pipeline and Storage segment, Gathering segment and Utility segment, respectively. These amounts were in accounts payable and accrued liabilities at September 30, 2019 and paid during the six months ended March 31, 2020. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2019, since they represented non-cash investing activities at that date. These amounts have been included in the Consolidated Statement of Cash Flows at March 31, 2020. DEGREE DAYS Percent Colder (Warmer) Than: Three Months Ended March 31, Normal 2021 2020 Normal (1) Last Year (1) Buffalo, NY 3,290 2,978 2,738 (9.5 ) 8.8 Erie, PA 3,108 2,750 2,555 (11.5 ) 7.6 Six Months Ended March 31, Buffalo, NY 5,543 4,899 4,970 (11.6 ) (1.4 ) Erie, PA 5,152 4,447 4,461 (13.7 ) (0.3 ) (1) Percents compare actual 2021 degree days to normal degree days and actual 2021 degree days to actual 2020 degree days. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Gas Production/Prices: Production (MMcf) Appalachia 81,446 55,638 25,808 157,115 109,922 47,193 West Coast 428 479 (51 ) 869 966 (97 ) Total Production 81,874 56,117 25,757 157,984 110,888 47,096 Average Prices (Per Mcf) Appalachia $ 2.28 $ 1.77 $ 0.51 $ 2.23 $ 1.97 $ 0.26 West Coast 7.14 4.34 2.80 6.07 4.67 1.40 Weighted Average 2.31 1.80 0.51 2.25 1.99 0.26 Weighted Average after Hedging 2.28 2.12 0.16 2.21 2.22 (0.01 ) Oil Production/Prices: Production (Thousands of Barrels) Appalachia 1 1 — 1 2 (1 ) West Coast 561 605 (44 ) 1,124 1,206 (82 ) Total Production 562 606 (44 ) 1,125 1,208 (83 ) Average Prices (Per Barrel) Appalachia $ 48.47 $ 55.90 $ (7.43 ) $ 43.83 $ 55.48 $ (11.65 ) West Coast 59.83 49.91 9.92 51.64 56.25 (4.61 ) Weighted Average 59.82 49.92 9.90 51.63 56.25 (4.62 ) Weighted Average after Hedging 57.11 58.23 (1.12 ) 53.50 60.57 (7.07 ) Total Production (MMcfe) 85,246 59,753 25,493 164,734 118,136 46,598 Selected Operating Performance Statistics: General & Administrative Expense per Mcfe (1) $ 0.21 $ 0.29 $ (0.08 ) $ 0.21 $ 0.28 $ (0.07 ) Lease Operating and Transportation Expense per Mcfe (1)(2) $ 0.79 $ 0.87 $ (0.08 ) $ 0.80 $ 0.87 $ (0.07 ) Depreciation, Depletion & Amortization per Mcfe (1) $ 0.54 $ 0.76 $ (0.22 ) $ 0.56 $ 0.76 $ (0.20 ) (1) Refer to page 15 for the General and Administrative Expense, Lease Operating and Transportation Expense and Depreciation, Depletion, and Amortization Expense for the Exploration and Production segment. (2) Amounts include transportation expense of $0.57 and $0.56 per Mcfe for the three months ended March 31, 2021 and March 31, 2020, respectively. Amounts include transportation expense of $0.57 and $0.57 per Mcfe for the six months ended March 31, 2021 and March 31, 2020, respectively. NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Hedging Summary for Remaining Six Months of Fiscal 2021 Volume Average Hedge Price Oil Swaps Brent 708,000 BBL $ 57.57 / BBL NYMEX 78,000 BBL $ 51.00 / BBL Total 786,000 BBL $ 56.91 / BBL Gas Swaps NYMEX 74,340,000 MMBTU $ 2.62 / MMBTU No Cost Collars 14,100,000 MMBTU $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling) Fixed Price Physical Sales 47,653,084 MMBTU $ 2.26 / MMBTU Total 136,093,084 MMBTU Hedging Summary for Fiscal 2022 Volume Average Hedge Price Oil Swaps Brent 900,000 BBL $ 56.66 / BBL NYMEX 156,000 BBL $ 51.00 / BBL Total 1,056,000 BBL $ 55.83 / BBL Gas Swaps NYMEX 144,590,000 MMBTU $ 2.66 / MMBTU No Cost Collars 2,350,000 MMBTU $ 2.28 / MMBTU (Floor) / $2.77 / MMBTU (Ceiling) Fixed Price Physical Sales 46,867,111 MMBTU $ 2.23 / MMBTU Total 193,807,111 MMBTU Hedging Summary for Fiscal 2023 Volume Average Hedge Price Oil Swaps Brent 240,000 BBL $ 54.25 / BBL Total 240,000 BBL $ 54.25 / BBL Gas Swaps NYMEX 24,700,000 MMBTU $ 2.55 / MMBTU Fixed Price Physical Sales 38,408,538 MMBTU $ 2.24 / MMBTU Total 63,108,538 MMBTU Hedging Summary for Fiscal 2024 Volume Average Hedge Price Oil Swaps Brent 120,000 BBL $ 50.30 / BBL Total 120,000 BBL $ 50.30 / BBL Gas Swaps NYMEX 1,150,000 MMBTU $ 2.45 / MMBTU Fixed Price Physical Sales 20,817,022 MMBTU $ 2.23 / MMBTU Total 21,967,022 MMBTU Hedging Summary for Fiscal 2025 Volume Average Hedge Price Oil Swaps Brent 120,000 BBL $ 50.32 / BBL Total 120,000 BBL $ 50.32 / BBL Fixed Price Physical Sales 2,293,200 MMBTU $ 2.18 / MMBTU NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES Pipeline & Storage Throughput - (millions of cubic feet - MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Firm Transportation - Affiliated 43,124 42,602 522 73,088 77,269 (4,181 ) Firm Transportation - Non-Affiliated 166,372 153,197 13,175 339,436 327,178 12,258 Interruptible Transportation 435 531 (96 ) 1,024 1,244 (220 ) 209,931 196,330 13,601 413,548 405,691 7,857 Gathering Volume - (MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Gathered Volume 95,121 65,134 29,987 183,466 129,526 53,940 Utility Throughput - (MMcf) Three Months Ended Six Months Ended March 31, March 31, Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Retail Sales: Residential Sales 29,052 26,155 2,897 47,465 45,631 1,834 Commercial Sales 4,309 4,033 276 6,836 6,846 (10 ) Industrial Sales 223 183 40 376 400 (24 ) 33,584 30,371 3,213 54,677 52,877 1,800 Transportation 24,584 25,157 (573 ) 42,518 45,712 (3,194 ) 58,168 55,528 2,640 97,195 98,589 (1,394 ) NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES
In addition to financial measures calculated in accordance with generally accepted accounting principles (GAAP), this press release contains information regarding Adjusted Operating Results, Adjusted EBITDA and free cash flow, which are non-GAAP financial measures. The Company believes that these non-GAAP financial measures are useful to investors because they provide an alternative method for assessing the Company's ongoing operating results or liquidity and for comparing the Company’s financial performance to other companies. The Company's management uses these non-GAAP financial measures for the same purpose, and for planning and forecasting purposes. The presentation of non-GAAP financial measures is not meant to be a substitute for financial measures in accordance with GAAP.
Management defines Adjusted Operating Results as reported GAAP earnings before items impacting comparability. The following table reconciles National Fuel's reported GAAP earnings to Adjusted Operating Results for the three and six months ended March 31, 2021 and 2020:
Three Months Ended Six Months Ended March 31, March 31, (in thousands except per share amounts) 2021 2020 2021 2020 Reported GAAP Earnings $ 112,436 $ (106,068 ) $ 190,210 $ (19,477 ) Items impacting comparability: Impairment of oil and gas properties (E&P) — 177,761 76,152 177,761 Tax impact of impairment of oil and gas properties — (48,503 ) (20,980 ) (48,503 ) Gain on sale of timber properties (Corporate/All Other) — — (51,066 ) — Tax impact of gain on sale of timber properties — — 14,069 — Premium paid on early redemption of debt 15,715 — 15,715 — Tax impact of premium paid on early redemption of debt (4,321 ) — (4,321 ) — Deferred tax valuation allowance — 56,770 — 56,770 Unrealized (gain) loss on other investments (Corporate/All Other) (848 ) 5,414 450 6,433 Tax impact of unrealized (gain) loss on other investments 178 (1,137 ) (94 ) (1,351 ) Adjusted Operating Results $ 123,160 $ 84,237 $ 220,135 $ 171,633 Reported GAAP Earnings Per Share $ 1.23 $ (1.23 ) $ 2.08 $ (0.23 ) Items impacting comparability: Impairment of oil and gas properties, net of tax (E&P) — 1.49 0.60 1.49 Gain on sale of timber properties, net of tax (Corporate/All Other) — — (0.40 ) — Premium paid on early redemption of debt, net of tax 0.12 — 0.12 — Deferred tax valuation allowance — 0.66 — 0.66 Unrealized (gain) loss on other investments, net of tax (Corporate/All Other) (0.01 ) 0.05 — 0.06 Adjusted Operating Results Per Share $ 1.34 $ 0.97 $ 2.40 $ 1.98 Management defines Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability. The following tables reconcile National Fuel's reported GAAP earnings to Adjusted EBITDA for the three and six months ended March 31, 2021 and 2020:
Three Months Ended Six Months Ended March 31, March 31, (in thousands) 2021 2020 2021 2020 Reported GAAP Earnings $ 112,436 $ (106,068 ) $ 190,210 $ (19,477 ) Depreciation, Depletion and Amortization 84,342 77,912 167,462 152,830 Other (Income) Deductions 10,875 17,480 13,051 20,520 Interest Expense 50,518 27,162 84,694 54,156 Income Taxes 40,210 36,846 69,627 68,241 Impairment of Oil and Gas Producing Properties — 177,761 76,152 177,761 Gain on Sale of Timber Properties — — (51,066 ) — Adjusted EBITDA $ 298,381 $ 231,093 $ 550,130 $ 454,031 Adjusted EBITDA by Segment Pipeline and Storage Adjusted EBITDA $ 58,570 $ 49,102 $ 116,706 $ 92,043 Gathering Adjusted EBITDA 41,424 29,541 81,217 58,973 Total Midstream Businesses Adjusted EBITDA 99,994 78,643 197,923 151,016 Exploration and Production Adjusted EBITDA 127,146 79,846 227,890 171,947 Utility Adjusted EBITDA 73,885 73,192 130,853 132,655 Corporate and All Other Adjusted EBITDA (2,644 ) (588 ) (6,536 ) (1,587 ) Total Adjusted EBITDA $ 298,381 $ 231,093 $ 550,130 $ 454,031 NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDAThree Months Ended Six Months Ended March 31, March 31, (in thousands) 2021 2020 2021 2020 Exploration and Production Segment Reported GAAP Earnings $ 36,822 $ (175,275 ) $ 7,199 $ (151,299 ) Depreciation, Depletion and Amortization 46,139 45,136 91,471 89,284 Other (Income) Deductions 219 187 412 349 Interest Expense 30,222 14,163 45,713 28,220 Income Taxes 13,744 17,874 6,943 27,632 Impairment of Oil and Gas Producing Properties — 177,761 76,152 177,761 Adjusted EBITDA $ 127,146 $ 79,846 $ 227,890 $ 171,947 Pipeline and Storage Segment Reported GAAP Earnings $ 24,928 $ 22,087 $ 49,112 $ 40,192 Depreciation, Depletion and Amortization 15,729 13,356 31,197 24,960 Other (Income) Deductions (1,064 ) (1,361 ) (2,045 ) (2,739 ) Interest Expense 10,552 7,152 21,283 14,264 Income Taxes 8,425 7,868 17,159 15,366 Adjusted EBITDA $ 58,570 $ 49,102 $ 116,706 $ 92,043 Gathering Segment Reported GAAP Earnings $ 20,700 $ 19,898 $ 41,250 $ 35,842 Depreciation, Depletion and Amortization 8,096 5,279 16,001 10,418 Other (Income) Deductions 59 (18 ) (108 ) (14 ) Interest Expense 5,166 2,160 9,297 4,379 Income Taxes 7,403 2,222 14,777 8,348 Adjusted EBITDA $ 41,424 $ 29,541 $ 81,217 $ 58,973 Utility Segment Reported GAAP Earnings $ 32,044 $ 31,499 $ 55,081 $ 58,082 Depreciation, Depletion and Amortization 14,311 13,751 28,305 27,382 Other (Income) Deductions 11,800 12,094 17,746 17,906 Interest Expense 5,495 5,516 10,947 11,190 Income Taxes 10,235 10,332 18,774 18,095 Adjusted EBITDA $ 73,885 $ 73,192 $ 130,853 $ 132,655 Corporate and All Other Reported GAAP Earnings $ (2,058 ) $ (4,277 ) $ 37,568 $ (2,294 ) Depreciation, Depletion and Amortization 67 390 488 786 Gain on Sale of Timber Properties — — (51,066 ) — Other (Income) Deductions (139 ) 6,578 (2,954 ) 5,018 Interest Expense (917 ) (1,829 ) (2,546 ) (3,897 ) Income Taxes 403 (1,450 ) 11,974 (1,200 ) Adjusted EBITDA $ (2,644 ) $ (588 ) $ (6,536 ) $ (1,587 ) Management defines free cash flow as funds from operations less capital expenditures. The Company is unable to provide a reconciliation of projected free cash flow as described in this release to its comparable financial measure calculated in accordance with GAAP without unreasonable efforts. This is due to our 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.
