Press Release: National Fuel Reports First Quarter Earnings

· 02/04/2021 16:45

Three Months Ended December 31, ------------------------ (in thousands except per share amounts) 2020 2019 ------------ ---------- Reported GAAP Earnings $ 77,774 $86,591 Items impacting comparability: Impairment of oil and gas properties (E&P) 76,152 -- Tax impact of impairment of oil and gas properties (20,980) -- Gain on sale of timber properties (Corporate / All Other) (51,066) -- Tax impact of gain on sale of timber properties 14,069 -- Unrealized (gain) loss on other investments (Corporate / All Other) 1,298 1,019 Tax impact of unrealized (gain) loss on other investments (272) (214) ----------- ------- Adjusted Operating Results $ 96,975 $87,396 ======= ====== Reported GAAP Earnings Per Share $ 0.85 $ 1.00 Items impacting comparability: Impairment of oil and gas properties, net of tax (E&P) 0.60 -- Gain on sale of timber properties, net of tax (Corporate / All Other) (0.40) -- Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) 0.01 0.01 Adjusted Operating Results Per Share $ 1.06 $ 1.01 ======= ======-- GAAP net income of $77.8 million, or $0.85 per share, which includes a $55.2 million non-cash, after-tax impairment of oil and gas properties, and a $37.0 million after-tax gain on the sale of the Company's timber properties, compared to GAAP net income of $86.6 million, or $1.00 per share, in the prior year. -- Adjusted operating results of $97.0 million, or $1.06 per share, compared to $87.4 million, or $1.01 per share, in the prior year (see non-GAAP reconciliation on page 2). -- Adjusted EBITDA of $251.7 million, compared to $222.9 million in the prior year (see non-GAAP reconciliation on page 21). -- Pipeline & Storage segment Adjusted EBITDA of $58.1 million, an increase of 35% from the prior year. -- Gathering segment Adjusted EBITDA of $39.8 million, an increase of 35% from the prior year. -- E&P segment Adjusted EBITDA of $100.7 million, an increase of 9% from the prior year. -- E&P segment net production of 79.5 Bcfe, an increase of 21.1 Bcfe, or 36%, from the prior year, which includes the impact of the Company's Appalachian asset acquisition and approximately 4 Bcf of price-related natural gas curtailments. -- Average realized natural gas prices of $2.14 per Mcf, down $0.18 per Mcf from the prior year. -- Average realized oil prices of $49.91 per Bbl, down $13.01 per Bbl from the prior year. -- Utility segment completed its system modernization program for calendar year 2020, replacing over 150 miles of older vintage pipelines. While maintaining the Company's long-standing focus on the safety and reliability of its distribution network, this program has contributed to the more than 60% reduction in Utility greenhouse gas emissions since 1990. -- Company completed the sale of substantially all of its timber assets in Pennsylvania, with net proceeds of $104.6 million. -- Company is increasing its fiscal 2021 earnings guidance to a range of $3.65 to $3.95, an increase of $0.10 at the midpoint.

National Fuel Reports First Quarter Earnings

WILLIAMSVILLE, N.Y., Feb. 04, 2021 (GLOBE NEWSWIRE) -- National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced consolidated results for the first quarter of its 2021 fiscal year.

FISCAL 2021 FIRST QUARTER SUMMARY

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: "National Fuel had an excellent start to our fiscal 2021 on the strength of our recently completed Empire North expansion project and our Appalachian E&P and gathering acquisition. We continue to see the benefits of these newly acquired assets, with record production at Seneca driving meaningful earnings growth in our gathering segment and long-term, sustainable reductions in the cost structure of our upstream business.

As we continue to confront the COVID-19 pandemic, the safety of our employees, customers, and communities remains paramount to our daily operations across each of our businesses. National Fuel and its dedicated workforce have retained their focus on business continuity during this health crisis, and to date, the Company has not experienced any significant financial or operational impacts.

Looking forward, we are well-positioned to execute on our near-term integrated growth opportunities, with preliminary construction activities on our FM100 expansion and modernization project -- the largest in the Company's history -- expected to start in the next few weeks. This project, which will add more than $50 million in annual Pipeline and Storage revenues, further supports the integrated development of our prolific and highly-economic Marcellus and Utica assets and puts us on a path to generating meaningful consolidated free cash flow in fiscal 2022.

Additionally, we continue to make progress with our ESG disclosures and initiatives. Across our system, we're making investments that will reduce our operational and fugitive emissions. We're also aggressively promoting our Utility's conservation and energy efficiency programs to help lower the end-use emissions of our customers. Lastly, both on our own and through participation in programs like the Low Carbon Resources Initiatives, we're evaluating new low- and zero-carbon fuel sources and technologies. All of these initiatives make National Fuel well-positioned to play a meaningful and continued role in the decarbonization of the economy."

RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS

FISCAL 2021 GUIDANCE UPDATE

National Fuel is revising its fiscal 2021 earnings guidance to reflect the results of the first 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 $3.65 to $3.95 per share, an increase of $0.10 per share from the midpoint of the Company's prior guidance range. The increase from the Company's prior earnings guidance reflects higher expected price realizations on Seneca's oil production and lower expected exploration and production operating unit costs, partially offset by lower expected price realizations on Seneca's natural gas production.

The Company is now assuming that NYMEX natural gas prices will average $2.75 per MMBtu for the remainder of fiscal 2021, a decrease of $0.25 per MMBtu from the $3.00 per MMBtu assumed in the previous guidance. Additionally, the Company is now assuming that WTI oil prices will average $52.50 per Bbl for the remainder of the year, a $15.00 increase from the $37.50 per Bbl assumed in the previous guidance. For guidance purposes, the Company's updated projections approximate the current NYMEX forward markets for natural gas and oil 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 216 Bcf, or approximately 93% of its projected remaining fiscal 2021 Appalachian production, limiting its exposure to in-basin markets. Approximately 186 Bcf of those sales, or 80% 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 1,079 Mbbl, or approximately 67%, 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 FIRST QUARTER RESULTS BY SEGMENT

The following earnings discussion of each operating segment for the quarter ended December 31, 2020 is summarized in a tabular form on pages 8 and 9 of this report. 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

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February 04, 2021 16:45 ET (21:45 GMT)