Market Overview

National Fuel Reports Third Quarter Earnings and Provides Preliminary Guidance for Fiscal 2020

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WILLIAMSVILLE, N.Y., Aug. 01, 2019 (GLOBE NEWSWIRE) -- National Fuel Gas Company ("National Fuel" or the "Company") (NYSE:NFG) today announced consolidated results for the third quarter of its 2019 fiscal year and for the nine months ended June 30, 2019.

FISCAL 2019 THIRD QUARTER SUMMARY

  • GAAP earnings of $63.8 million, or $0.73 per share, compared to $63.0 million, or $0.73 per share, in the prior year
  • Adjusted operating results of $61.8 million, or $0.71 per share, compared to $63.3 million, or $0.73 per share, in the prior year (see non-GAAP reconciliation on page 2)
  • Adjusted EBITDA of $182.9 million compared to $175.2 million in the prior year (non-GAAP reconciliation on page 24)
  • E&P segment net production of 54.7 Bcfe, an increase of 23% from the prior year and 12% from the second quarter
  • Average natural gas prices, after the impact of hedging, of $2.36 per Mcf, down $0.07 per Mcf from the prior year
  • Average oil prices, after the impact of hedging, of $62.92 per Bbl, up $4.18 per Bbl from the prior year
  • Gathering segment operating revenues increased $5.0 million on an 18% increase in gathered volumes
  • Utility segment net income increased $3.4 million, or 87%, on higher customer margins

FISCAL 2019 AND FISCAL 2020 GUIDANCE UPDATE SUMMARY

The Company is updating its fiscal 2019 guidance and providing preliminary fiscal 2020 guidance relating to earnings, capital expenditures, and production.  See pages 5 and 6 for additional discussion.

  Updated
FY 2019
Guidance
  Preliminary
FY 2020
Guidance
  Key Forecast Drivers
           
Earnings per Share $3.40 to $3.50   $3.25 to $3.55   Increase in production offset by lower natural gas prices
           
Capital Expenditures ($MM) $745 to $800   $725 to $820    
E&P and Gathering $525 to $550   $455 to $505   Seneca to drop rig in Q2 fiscal 2020
Pipeline and Storage $130 to $150   $180 to $215   Empire North expansion project
Utility $90 to $100   $90 to $100   System modernization backed by rate tracker in NY
           
E&P Production (Bcfe) 205 to 215   235 to 245   Utica and Marcellus development
           

MANAGEMENT COMMENTS

David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: "Our fiscal third quarter results once again demonstrate why the integrated model is a significant advantage for National Fuel, particularly during periods of commodity price volatility. Our Utility and Gathering businesses led the way with significant year over year earnings growth, along with the strong operational performance of our Exploration and Production business. As we look to fiscal 2020, we do so with a close eye on longer-term natural gas prices and a focus on prudently deploying capital and maintaining our strong balance sheet. We plan to reduce our drilling activity accordingly but will continue to invest in pipeline expansion projects and utility system modernization opportunities that add shareholder value and position National Fuel for long-term growth and success

 
RECONCILIATION OF GAAP EARNINGS TO ADJUSTED OPERATING RESULTS 
    Three Months Ended   Nine Months Ended
    June 30,   June 30,
(in thousands except per share amounts)   2019   2018   2019   2018
Reported GAAP Earnings   $ 63,753     $ 63,025     $ 257,009     $ 353,527  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform           (5,000 )   (107,000 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)   (1,020 )   339     (783 )   436  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness   214     (83 )   164     (107 )
Unrealized (gain) loss on other investments (Corporate / All Other)   (1,420 )       1,096      
Tax impact of unrealized (gain) loss on other investments   298         (230 )    
Adjusted Operating Results   $ 61,825     $ 63,281     $ 252,256     $ 246,856  
                 
Reported GAAP Earnings per share   $ 0.73     $ 0.73     $ 2.96     $ 4.09  
Items impacting comparability                
Remeasurement of deferred income taxes under 2017 Tax Reform           (0.06 )   (1.24 )
Mark-to-market adjustments due to hedge ineffectiveness (E&P)   (0.01 )       (0.01 )   0.01  
Tax impact of mark-to-market adjustments due to hedge ineffectiveness                
Unrealized (gain) loss on other investments (Corporate / All Other)   (0.02 )       0.01      
Tax impact of unrealized (gain) loss on other investments                
Rounding   0.01         0.01      
Adjusted Operating Results per share   $ 0.71     $ 0.73     $ 2.91     $ 2.86  
                                 

DISCUSSION OF RESULTS BY SEGMENT

The following discussion of earnings of each operating segment for the quarter ended June 30, 2019, is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the nine months ended June 30, 2019, are summarized on pages 11 and 12).  It may be helpful to refer to those tables while reviewing this discussion.  Note that management defines Adjusted Operating Results as reported GAAP earnings adjusted for items impacting comparability, and Adjusted EBITDA as reported GAAP earnings before the following items: interest expense, income taxes, depreciation, depletion and amortization, other income and deductions, impairments, and other items reflected in operating income that impact comparability.

Upstream Business

Exploration and Production Segment

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

  Three Months Ended
  June 30,
(in thousands) 2019   2018   Variance
GAAP Earnings $ 26,512     $ 27,817     $ (1,305 )
Mark-to-market adjustments due to hedge ineffectiveness $ (1,020 )   $ 339     $ (1,359 )
Tax impact of mark-to-market adjustments due to hedge ineffectiveness $ 214     $ (83 )   $ 297  
Adjusted Operating Results $ 25,706     $ 28,073     $
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