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National Fuel Reports Third Quarter Earnings and Announces Preliminary Guidance For Fiscal 2023
Source: Nasdaq GlobeNewswire / 04 Aug 2022 16:45:02 America/New_York
WILLIAMSVILLE, N.Y., Aug. 04, 2022 (GLOBE NEWSWIRE) -- National Fuel Gas Company (“National Fuel” or the “Company”) (NYSE:NFG) today announced consolidated results for the third quarter of its 2022 fiscal year and for the nine months ended June 30, 2022.
FISCAL 2022 THIRD QUARTER SUMMARY
- GAAP net income of $108.2 million, or $1.17 per share, compared to GAAP net income of $86.5 million, or $0.94 per share, in the prior year, an increase of 24% per share.
- Adjusted operating results of $141.9 million, or $1.54 per share, an increase of 66%, compared to $0.93 per share, in the prior year (see non-GAAP reconciliation on page 2).
- Adjusted EBITDA of $318.1 million, an increase of 36%, compared to $234.2 million in the prior year (see non-GAAP reconciliation on page 25).
- Successfully closed the sale of the Company's California assets for net cash proceeds of approximately $241 million, after customary closing adjustments, and future contingent consideration with a potential value of up to $30 million.
- Company is revising its fiscal 2022 earnings guidance to a range of $5.85 to $5.95 per share, excluding items impacting comparability, and initiating its fiscal 2023 earnings guidance with a range of $7.25 to $7.75 per share, an increase of 27% from fiscal 2022, at the midpoint (see Guidance Summary on page 8).
MANAGEMENT COMMENTS
David P. Bauer, President and Chief Executive Officer of National Fuel Gas Company, stated: “National Fuel had an excellent third quarter, with adjusted operating results increasing 66% compared to the prior year. The benefits of our integrated approach to development were evident during the quarter, with the FM100 Project driving meaningful growth in our Pipeline and Storage segment, while providing a valuable outlet for Seneca’s natural gas production. Moreover, our coordinated approach to Appalachian development, in which we own and operate 100% of our gathering infrastructure, allowed us to maximize Seneca’s production during the quarter, capitalizing on the further improved commodity price environment.”
"As we look to next year, the Company is poised for continued earnings growth and sustained free cash flow generation. Underpinned by our highly-efficient Appalachian development program, our valuable firm transportation portfolio, and a strong natural gas price outlook, we expect to continue to grow our natural gas production base, with our gathering business growing in lockstep. This, coupled with our ongoing investment in modernizing our resilient and reliable transmission, storage, and distribution infrastructure, positions the Company to deliver value through further earnings growth, deleveraging our balance sheet, and the predictable return of an increasing amount of cash to 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) 2022 2021 2022 2021 Reported GAAP Earnings $ 108,158 $ 86,475 $ 407,879 $ 276,685 Items impacting comparability: Items related to West Coast asset sale: Gain on sale of West Coast assets (E&P) (12,736 ) — (12,736 ) — Tax impact of gain on sale of West Coast assets 3,225 — 3,225 — Loss from discontinuance of crude oil cash flow hedges (E&P) 44,632 — 44,632 — Tax impact of loss from discontinuance of crude oil cash flow hedges (11,303 ) — (11,303 ) — Transaction and severance costs (E&P) 9,693 — 9,693 — Tax impact of transaction and severance costs (2,455 ) — (2,455 ) — Total items impacting comparability related to West Coast asset sale 31,056 — 31,056 — Reduction of other post-retirement regulatory liability (Utility) — — (18,533 ) — Tax impact of reduction of other post-retirement regulatory liability — — 3,892 — Unrealized (gain) loss on other investments (Corporate / All Other) 3,434 (1,025 ) 10,093 (575 ) Tax impact of unrealized (gain) loss on other investments (721 ) 215 (2,120 ) 120 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 Premium paid on early redemption of debt — — — 15,715 Tax impact of premium paid on early redemption of debt — — — (4,321 ) Adjusted Operating Results $ 141,927 $ 85,665 $ 432,267 $ 305,799 Reported GAAP Earnings Per Share $ 1.17 $ 0.94 $ 4.43 $ 3.02 Items impacting comparability: Items related to West Coast asset sale: Gain on sale of West Coast assets, net of tax (E&P) (0.10 ) — (0.10 ) — Loss from discontinuance of crude oil cash flow hedges, net of tax (E&P) 0.36 — 0.36 — Transaction and severance costs, net of tax (E&P) 0.08 — 0.08 — Total items impacting comparability related to West Coast asset sale 0.34 — 0.34 — Reduction of other post-retirement regulatory liability, net of tax (Utility) — — (0.16 ) — Unrealized (gain) loss on other investments, net of tax (Corporate / All Other) 0.03 (0.01 ) 0.08 — 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 ) Premium paid on early redemption of debt, net of tax — — — 0.12 Adjusted Operating Results Per Share $ 1.54 $ 0.93 $ 4.69 $ 3.34 DISCUSSION OF GUIDANCE UPDATE
National Fuel is revising its fiscal 2022 earnings guidance range and is now projecting earnings, excluding items impacting comparability, will be within the range of $5.85 to $5.95 per share. This updated range reflects the results of the third quarter, along with updated assumptions for the balance of the year, as detailed on page 8.
The Exploration and Production segment’s fiscal 2022 net production is expected to be in the range of 350 to 355 Bcfe, an increase of 2.5 Bcfe from the prior midpoint. Seneca currently has firm sales contracts in place for approximately 90% of its projected remaining fiscal 2022 natural gas production, limiting its exposure to in-basin markets. Approximately 80% of expected remaining Appalachian production is either matched by a financial hedge or was entered into at a fixed price.
The Company is also initiating preliminary guidance for fiscal 2023 with earnings projected to be within a range of $7.25 to $7.75 per share, or $7.50 per share at the midpoint of the range, an increase of 27% from the midpoint of the fiscal 2022 guidance range. The anticipated increase in earnings is being driven largely by higher anticipated commodity price realizations, as well as forecasted growth in natural gas production and the associated impact on Gathering revenues.
Seneca’s fiscal 2023 net production is increasing to an expected range of 370 to 390 Bcfe, an increase of 27.5 Bcfe versus fiscal 2022 at the midpoint of the respective guidance ranges. When adjusting for the sale of Seneca’s California properties, fiscal 2023 production is expected to be 11% higher than fiscal 2022, at the midpoint of the respective guidance ranges.
In addition, the Company anticipates its natural gas price realizations after hedging to increase by approximately $0.62 per Mcf from its estimated fiscal 2022 realizations, driven in large part by lower expected hedge losses. Overall, Seneca has firm sales contracts in place for approximately 87% of its expected fiscal 2023 natural gas production, limiting its exposure to in-basin markets, while also having 67% supported by financial hedges, limiting exposure to potential swings in natural gas prices in fiscal 2023.
The Company’s consolidated capital expenditures in fiscal 2023 are expected to be in a range of $830 million to $940 million, an increase of $77.5 million versus the midpoint of its fiscal 2022 guidance. This preliminary guidance range incorporates planned activity, as described below, as well as anticipated inflationary impacts across all segments.
The Exploration and Production segment expects to maintain its current two-rig program for the entirety of fiscal 2023, and modestly increase completion activity relative to fiscal 2022. This increased level of completion activity is expected to be coupled with a greater share of our development program targeting the prolific Tioga County acreage. This will require incremental near-term capital expenditures in the Gathering segment to build out necessary infrastructure to support Seneca's growing production in the region.
In the Company’s regulated Pipeline and Storage and Utility segments, capital expenditures are primarily focused on modernizing existing infrastructure, which is expected to drive rate base growth in the range of 3% to 5%, on average over the next several years. These modernization efforts continue to enhance the safety and resiliency of our infrastructure and contribute to the ongoing reduction in the Company’s emissions profile.
Additional details on the Company's updated forecast assumptions and business segment guidance for fiscal 2022 and fiscal 2023 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, 2022 is summarized in a tabular form on pages 9 and 10 of this report (earnings drivers for the nine months ended June 30, 2022 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.
Three Months Ended June 30, (in thousands) 2022 2021 Variance GAAP Earnings $ 56,497 $ 39,015 $ 17,482 Gain on sale of West Coast assets, net of tax (9,511 ) — (9,511 ) Loss from discontinuance of crude oil cash flow hedges, net of tax 33,329 — 33,329 Transaction and severance costs related to West Coast asset sale, net of tax 7,238 — 7,238 Adjusted Operating Results $ 87,553 $ 39,015 $ 48,538 Adjusted EBITDA $ 184,622 $ 116,052 $ 68,570 Seneca’s third quarter GAAP earnings, which increased $17.5 million versus the prior year, include several items related to the sale of its California assets. In particular, Seneca recorded a $12.7 million ($9.5 million after-tax) gain related to assets that were not subject to the full cost method of accounting. The Company also recorded a loss of $44.6 million ($33.3 million after-tax) related to the termination of its remaining crude oil derivative contracts as a result of the sale. In addition, the Company incurred transaction and severance costs of $9.7 million ($7.2 million after-tax) related to the California asset sale. Excluding these items noted above, Seneca’s earnings increased $48.5 million primarily due to higher realized natural gas and crude oil prices, higher natural gas production, and a lower effective income tax rate, all of which were partially offset by higher operating expenses and higher interest expense.
Seneca produced 92.4 Bcfe during the third quarter, an increase of 9.4 Bcfe, or 11%, from the prior year. This is a result of a 9.5 Bcf increase in natural gas production primarily due to growth from Seneca's development program in Appalachia. Seneca's crude oil production decreased 32 MBbls, or 6%, versus the prior year primarily due to natural production decline in California.
Seneca's average realized natural gas price, after the impact of hedging and transportation costs, was $2.87 per Mcf, an increase of $0.67 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 $77.65 per Bbl, an increase of $18.43 per Bbl compared to the prior year.
Lease operating and transportation (“LOE”) expense increased $12.8 million primarily due to higher transportation costs in Appalachia as a result of increased production, and higher steam fuel, labor, utilities, well repair and workover expenses in California. LOE expense includes $53.1 million in intercompany expense for gathering and compression services used to connect Seneca's Appalachian production to sales points along interstate pipelines. Depreciation, depletion and amortization ("DD&A") expense increased $9.3 million due to higher natural gas production and a higher per unit DD&A rate, which was driven by an increase in capitalized costs in Seneca's full cost pool. Excluding the impact of the transaction and severance costs related to the sale of Seneca's California assets noted above, Seneca's other operating expenses increased $6.1 million due primarily to the accrual of estimated plugging and abandonment expenses related to certain offshore Gulf of Mexico wells that were formerly owned by the Company. Several years ago, Seneca sold those wells to an operator that has since gone bankrupt. As a result of that bankruptcy, the cost of abandoning the wells will likely revert back to Seneca.
Interest expense increased $2.6 million due primarily to a higher average amount of intercompany short-term borrowings outstanding coupled with a higher weighted average interest rate on such borrowings. The reduction in Seneca's effective income tax rate was primarily driven by the realization of the Enhanced Oil Recovery tax credit in fiscal 2022, which was not available in the prior year.
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 June 30, (in thousands) 2022 2021 Variance GAAP Earnings $ 26,599 $ 21,948 $ 4,651 Adjusted EBITDA $ 62,565 $ 53,086 $ 9,479 The Pipeline and Storage segment’s third quarter GAAP earnings increased $4.7 million versus the prior year primarily due to an increase in operating revenues, partially offset by higher operation and maintenance ("O&M") expense and higher DD&A expense. The increase in operating revenues of $11.5 million was primarily attributable to higher transportation revenues from Supply Corporation's FM100 Project, which was placed in service in December 2021. O&M expense increased $1.7 million primarily due to an increase in personnel costs, as well as higher vehicle fuel costs and compressor station maintenance costs. The increase in DD&A expense of $1.7 million was primarily attributable to incremental depreciation expense from the FM100 Project.
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 June 30, (in thousands) 2022 2021 Variance GAAP Earnings $ 24,658 $ 20,427 $ 4,231 Adjusted EBITDA $ 46,151 $ 39,929 $ 6,222 The Gathering segment’s third quarter GAAP earnings increased $4.2 million versus the prior year primarily due to higher operating revenues, which was partially offset by higher O&M expense. Operating revenues increased $7.3 million, or 15%, primarily driven by an 18.0 Bcf increase in gathered volumes from new wells that were brought on-line in Appalachia. The increase in O&M expense of $1.1 million was primarily due to an increase in personnel costs, higher costs for materials, and an increase in compressor station operating and preventative maintenance activity during the quarter.
Downstream Business
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 June 30, (in thousands) 2022 2021 Variance GAAP Earnings $ 4,622 $ 4,841 $ (219 ) Adjusted EBITDA $ 27,042 $ 29,431 $ (2,389 ) The Utility segment’s third quarter GAAP earnings were essentially flat versus the prior year as the benefit of higher customer margin (operating revenues less purchased gas sold) and a decrease in non-service post-retirement benefit costs recorded in other income (deductions) were offset by higher O&M expense. The increase in customer margin was due primarily to higher revenues from the Company's system modernization tracking mechanism in its New York service territory, partially offset by a reduction in base rates in Pennsylvania as a result of a rate proceeding in Pennsylvania that concluded in the second quarter whereby the Utility agreed to lower the amount of other post-employment benefit (“OPEB”) expense it recovers in rates. With the elimination of OPEB expenses in rates, there was also a decrease in non-service post-retirement benefit costs recorded in other income (deductions). The increase in O&M expense was primarily attributable to higher personnel costs and an increase in vehicle fuel costs.
Corporate and All Other
The Company’s operations that are included in Corporate and All Other generated a combined net loss of $4.2 million in the current year third quarter, which was a $4.4 million decrease from the combined earnings of $0.2 million generated in the prior-year third quarter. The decrease in earnings was primarily driven by unrealized losses on investment securities recognized in the current quarter compared to unrealized gains on investment securities in the prior-year third quarter.
EARNINGS TELECONFERENCE
The Company will host a conference call on Friday, August 5, 2022, 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: https://conferencingportals.com/event/LUMnWUbV. To access the webcast, visit the Events Calendar on the NFG Investor Relations website at investor.nationalfuelgas.com. An audio replay of the teleconference call will be available approximately two hours following the teleconference at the same website link and by phone at 800-770-2030 or 647-362-9199 using conference ID number “99543”. Both the webcast and conference call replay will be available until the close of business on Friday, August 12, 2022.
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: Brandon J. Haspett 716-857-7697 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: 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; changes in economic conditions, including inflationary pressures 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; changes in the price of natural gas; the creditworthiness or performance of the Company’s key suppliers, customers and counterparties; the length and severity of the ongoing COVID-19 pandemic, including its impacts across our businesses on demand, operations, global supply chains and liquidity; 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; impairments under the SEC’s full cost ceiling test for natural gas reserves; increased costs or delays or changes in 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; 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, 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 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 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; 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 2022 and initiating guidance for fiscal 2023. Additional details on the Company's forecast assumptions and business segment guidance for fiscal 2022 and fiscal 2023 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, 2022, including: (1) the after-tax gain on the sale of West Coast assets, which increased earnings by $0.10 per share; (2) the after-tax loss from the discontinuance of crude oil cash flow hedges, which reduced earnings by $0.36 per share; (3) after-tax transaction and severance costs related to the West Coast asset sale, which reduced earnings by $0.08 per share; (4) the after-tax reduction of an other post-retirement regulatory liability, which increased earnings by $0.16 per share; and (5) after-tax unrealized losses on other investments, which reduced earnings by $0.08 per share. While the Company expects to record certain adjustments to unrealized gain or loss on investments during the three months ending September 30, 2022, 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 2022 Guidance Preliminary FY 2023 Guidance Consolidated Earnings per Share, excluding items impacting comparability $5.85 to $5.95 $7.25 to $7.75 Consolidated Effective Tax Rate ~ 25 - 25.5% ~ 25.5 - 26% Capital Expenditures (Millions) Exploration and Production $525 - $550 $525 - $575 Pipeline and Storage $100 - $120 $110 - $130 Gathering $50 - $60 $85 - $105 Utility $100 - $110 $110 - $130 Consolidated Capital Expenditures $775 - $840 $830 - $940 Exploration & Production Segment Guidance* Commodity Price Assumptions NYMEX natural gas price (Oct - Mar | Apr - Sep) $7.75 /MMBtu $7.50 /MMBtu l $5.00 /MMBtu Appalachian basin spot price (Oct - Mar | Apr - Sep) $7.20 /MMBtu $6.50 /MMBtu l $3.90 /MMBtu Production (Bcfe) 350 to 355 370 to 390 E&P Operating Costs ($/Mcfe) LOE $0.70 - $0.71 $0.67 - $0.69 G&A ~$0.18 $0.17 - $0.19 DD&A $0.57 - $0.59 $0.60 - $0.64 Other Business Segment Guidance (Millions) Gathering Segment Revenues $210 - $220 $235 - $250 Pipeline and Storage Segment Revenues $365 - $375 $360 - $380 * Fiscal 2022 commodity price assumptions and operating costs are for the remaining 3 months of the fiscal year.
NATIONAL FUEL GAS COMPANY RECONCILIATION OF CURRENT AND PRIOR YEAR GAAP EARNINGS QUARTER ENDED JUNE 30, 2022 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Third quarter 2021 GAAP earnings $ 39,015 $ 21,948 $ 20,427 $ 4,841 $ 244 $ 86,475 Items impacting comparability: Unrealized (gain) loss on other investments (1,025 ) (1,025 ) Tax impact of unrealized (gain) loss on other investments 215 215 Third quarter 2021 adjusted operating results 39,015 21,948 20,427 4,841 (566 ) 85,665 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 16,589 16,589 Higher (lower) crude oil production (1,499 ) (1,499 ) Higher (lower) realized natural gas prices, after hedging 47,404 47,404 Higher (lower) realized crude oil prices, after hedging 7,663 7,663 Midstream Revenues Higher (lower) operating revenues 9,174 5,747 14,921 Downstream Margins*** Impact of usage and weather 232 232 Impact of new rates (1,105 ) (1,105 ) System modernization tracker revenues 1,345 1,345 Operating Expenses Lower (higher) lease operating and transportation expenses (10,129 ) (10,129 ) Lower (higher) operating expenses (4,806 ) (1,360 ) (833 ) (2,629 ) 1,616 (8,012 ) Lower (higher) depreciation / depletion (7,308 ) (1,353 ) (8,661 ) Other Income (Expense) (Higher) lower other deductions 1,938 (1,781 ) 157 (Higher) lower interest expense (2,039 ) (587 ) (508 ) 965 (2,169 ) Income Taxes Lower (higher) income tax expense / effective tax rate 3,267 (658 ) (317 ) 388 (1,715 ) 965 All other / rounding (604 ) (565 ) (366 ) 120 (24 ) (1,439 ) Third quarter 2022 adjusted operating results 87,553 26,599 24,658 4,622 (1,505 ) 141,927 Items impacting comparability: Gain on sale of West Coast assets 12,736 12,736 Tax impact of gain on sale of West Coast assets (3,225 ) (3,225 ) Loss from discontinuance of crude oil cash flow hedges (44,632 ) (44,632 ) Tax impact of loss from discontinuance of crude oil cash flow hedges 11,303 11,303 Transaction and severance costs related to West Coast asset sale (9,693 ) (9,693 ) Tax impact of transaction and severance costs related to West Coast asset sale 2,455 2,455 Unrealized gain (loss) on other investments (3,434 ) (3,434 ) Tax impact of unrealized gain (loss) on other investments 721 721 Third quarter 2022 GAAP earnings $ 56,497 $ 26,599 $ 24,658 $ 4,622 $ (4,218 ) $ 108,158 * 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, 2022 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Third quarter 2021 GAAP earnings per share $ 0.43 $ 0.24 $ 0.22 $ 0.05 $ — $ 0.94 Items impacting comparability: Unrealized (gain) loss on other investments, net of tax (0.01 ) (0.01 ) Third quarter 2021 adjusted operating results per share 0.43 0.24 0.22 0.05 (0.01 ) 0.93 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.18 0.18 Higher (lower) crude oil production (0.02 ) (0.02 ) Higher (lower) realized natural gas prices, after hedging 0.51 0.51 Higher (lower) realized crude oil prices, after hedging 0.08 0.08 Midstream Revenues Higher (lower) operating revenues 0.10 0.06 0.16 Downstream Margins*** Impact of usage and weather — — Impact of new rates (0.01 ) (0.01 ) System modernization tracker revenues 0.01 0.01 Operating Expenses Lower (higher) lease operating and transportation expenses (0.11 ) (0.11 ) Lower (higher) operating expenses (0.05 ) (0.01 ) (0.01 ) (0.03 ) 0.02 (0.08 ) Lower (higher) depreciation / depletion (0.08 ) (0.01 ) (0.09 ) Other Income (Expense) (Higher) lower other deductions 0.02 (0.02 ) — (Higher) lower interest expense (0.02 ) (0.01 ) (0.01 ) 0.01 (0.03 ) Income Taxes Lower (higher) income tax expense / effective tax rate 0.04 (0.01 ) — — (0.02 ) 0.01 All other / rounding (0.01 ) (0.01 ) — 0.02 — — Third quarter 2022 adjusted operating results per share 0.95 0.29 0.27 0.05 (0.02 ) 1.54 Items impacting comparability: Gain on sale of West Coast assets, net of tax 0.10 0.10 Loss from discontinuance of crude oil cash flow hedges, net of tax (0.36 ) (0.36 ) Transaction and severance costs related to West Coast asset sale, net of tax (0.08 ) (0.08 ) Unrealized gain (loss) on other investments, net of tax (0.03 ) (0.03 ) Third quarter 2022 GAAP earnings per share $ 0.61 $ 0.29 $ 0.27 $ 0.05 $ (0.05 ) $ 1.17 * 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, 2022 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / (Thousands of Dollars) Production Storage Gathering Utility All Other Consolidated* Nine months ended June 30, 2021 GAAP earnings $ 46,213 $ 71,060 $ 61,677 $ 59,922 $ 37,813 $ 276,685 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 (575 ) (575 ) Tax impact of unrealized (gain) loss on other investments 120 120 Nine months ended June 30, 2021 adjusted operating results 112,095 71,060 62,361 59,922 361 305,799 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 30,188 30,188 Higher (lower) crude oil production (3,787 ) (3,787 ) Higher (lower) realized natural gas prices, after hedging 93,251 93,251 Higher (lower) realized crude oil prices, after hedging 19,312 19,312 Higher (lower) other operating revenues 4,772 4,772 Midstream Revenues Higher (lower) operating revenues 15,550 11,717 27,267 Downstream Margins*** Impact of usage and weather 3,194 3,194 Impact of new rates (5,945 ) (5,945 ) System modernization tracker revenues 3,719 3,719 Regulatory revenue adjustments (1,047 ) (1,047 ) Higher (lower) energy marketing margins 1,301 1,301 Operating Expenses Lower (higher) lease operating and transportation expenses (17,314 ) (17,314 ) Lower (higher) operating expenses (7,841 ) (5,878 ) (2,180 ) (4,542 ) 1,756 (18,685 ) Lower (higher) property, franchise and other taxes (3,136 ) (751 ) (3,887 ) Lower (higher) depreciation / depletion (14,089 ) (2,853 ) (957 ) (17,899 ) Other Income (Expense) (Higher) lower other deductions 710 8,828 (1,875 ) 7,663 (Higher) lower interest expense 3,176 (679 ) 2,497 Income Taxes Lower (higher) income tax expense / effective tax rate 3,833 (436 ) (1,019 ) 1,243 (2,943 ) 678 All other / rounding 583 (166 ) (35 ) 466 342 1,190 Nine months ended June 30, 2022 adjusted operating results 221,043 77,236 69,887 65,159 (1,058 ) 432,267 Items impacting comparability: Reduction of other post-retirement regulatory liability 18,533 18,533 Tax impact of reduction of other post-retirement regulatory liability (3,892 ) (3,892 ) Gain on sale of West Coast assets 12,736 12,736 Tax impact of gain on sale of West Coast assets (3,225 ) (3,225 ) Loss from discontinuance of crude oil cash flow hedges (44,632 ) (44,632 ) Tax impact of loss from discontinuance of crude oil cash flow hedges 11,303 11,303 Transaction and severance costs related to West Coast asset sale (9,693 ) (9,693 ) Tax impact of transaction and severance costs related to West Coast asset sale 2,455 2,455 Unrealized gain (loss) on other investments (10,093 ) (10,093 ) Tax impact of unrealized gain (loss) on other investments 2,120 2,120 Nine months ended June 30, 2022 GAAP earnings $ 189,987 $ 77,236 $ 69,887 $ 79,800 $ (9,031 ) $ 407,879 * 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, 2022 (Unaudited) Upstream Midstream Downstream Exploration & Pipeline & Corporate / Production Storage Gathering Utility All Other Consolidated* Nine months ended June 30, 2021 GAAP earnings per share $ 0.50 $ 0.78 $ 0.67 $ 0.65 $ 0.42 $ 3.02 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 — — Rounding 0.01 (0.01 ) — Nine months ended June 30, 2021 adjusted operating results per share 1.22 0.78 0.68 0.65 0.01 3.34 Drivers of adjusted operating results** Upstream Revenues Higher (lower) natural gas production 0.33 0.33 Higher (lower) crude oil production (0.04 ) (0.04 ) Higher (lower) realized natural gas prices, after hedging 1.01 1.01 Higher (lower) realized crude oil prices, after hedging 0.21 0.21 Higher (lower) other operating revenues 0.05 0.05 Midstream Revenues Higher (lower) operating revenues 0.17 0.13 0.30 Downstream Margins*** Impact of usage and weather 0.03 0.03 Impact of new rates (0.06 ) (0.06 ) System modernization tracker revenues 0.04 0.04 Regulatory revenue adjustments (0.01 ) (0.01 ) Higher (lower) energy marketing margins 0.01 0.01 Operating Expenses Lower (higher) lease operating and transportation expenses (0.19 ) (0.19 ) Lower (higher) operating expenses (0.09 ) (0.06 ) (0.02 ) (0.05 ) 0.02 (0.20 ) Lower (higher) property, franchise and other taxes (0.03 ) (0.01 ) (0.04 ) Lower (higher) depreciation / depletion (0.15 ) (0.03 ) (0.01 ) (0.19 ) Other Income (Expense) (Higher) lower other deductions 0.01 0.10 (0.02 ) 0.09 (Higher) lower interest expense 0.03 (0.01 ) 0.02 Income Taxes Lower (higher) income tax expense / effective tax rate 0.04 — (0.01 ) 0.01 (0.03 ) 0.01 All other / rounding 0.01 (0.02 ) (0.01 ) 0.01 (0.01 ) (0.02 ) Nine months ended June 30, 2022 adjusted operating results per share 2.40 0.84 0.76 0.71 (0.02 ) 4.69 Items impacting comparability: Reduction of other post-retirement regulatory liability, net of tax 0.16 0.16 Gain on sale of West Coast assets, net of tax 0.10 0.10 Loss from discontinuance of crude oil cash flow hedges, net of tax (0.36 ) (0.36 ) Transaction and severance costs related to West Coast asset sale, net of tax (0.08 ) (0.08 ) Unrealized gain (loss) on other investments, net of tax (0.08 ) (0.08 ) Nine months ended June 30, 2022 GAAP earnings per share $ 2.06 $ 0.84 $ 0.76 $ 0.87 $ (0.10 ) $ 4.43 * 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 2022 2021 2022 2021 Operating Revenues: Utility and Energy Marketing Revenues $ 179,888 $ 126,933 $ 785,664 $ 587,247 Exploration and Production and Other Revenues 252,638 209,618 758,594 621,933 Pipeline and Storage and Gathering Revenues 70,098 57,846 206,642 177,491 502,624 394,397 1,750,900 1,386,671 Operating Expenses: Purchased Gas 67,948 18,737 369,168 177,018 Operation and Maintenance: Utility and Energy Marketing 46,403 42,577 146,523 139,521 Exploration and Production and Other 64,593 43,112 160,016 127,033 Pipeline and Storage and Gathering 33,988 31,239 97,434 87,471 Property, Franchise and Other Taxes 25,874 24,492 78,093 71,259 Depreciation, Depletion and Amortization 95,857 84,170 275,681 251,632 Impairment of Oil and Gas Producing Properties — — — 76,152 334,663 244,327 1,126,915 930,086 Gain on Sale of Assets 12,736 — 12,736 51,066 Operating Income 180,697 150,070 636,721 507,651 Other Income (Expense): Other Income (Deductions) (5,649 ) (2,028 ) 3,291 (15,078 ) Interest Expense on Long-Term Debt (30,091 ) (30,220 ) (90,300 ) (111,296 ) Other Interest Expense (3,882 ) (1,012 ) (6,561 ) (4,630 ) Income Before Income Taxes 141,075 116,810 543,151 376,647 Income Tax Expense 32,917 30,335 135,272 99,962 Net Income Available for Common Stock $ 108,158 $ 86,475 $ 407,879 $ 276,685 Earnings Per Common Share Basic $ 1.18 $ 0.95 $ 4.46 $ 3.04 Diluted $ 1.17 $ 0.94 $ 4.43 $ 3.02 Weighted Average Common Shares: Used in Basic Calculation 91,456,265 91,172,683 91,388,417 91,113,973 Used in Diluted Calculation 92,168,518 91,762,898 92,083,560 91,642,849 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, September 30, (Thousands of Dollars) 2022 2021 ASSETS Property, Plant and Equipment $ 12,299,545 $ 13,103,639 Less - Accumulated Depreciation, Depletion and Amortization 5,914,097 6,719,356 Net Property, Plant and Equipment 6,385,448 6,384,283 Current Assets: Cash and Temporary Cash Investments 432,576 31,528 Hedging Collateral Deposits 154,470 88,610 Receivables - Net 399,033 205,294 Unbilled Revenue 18,525 17,000 Gas Stored Underground 12,336 33,669 Materials, Supplies and Emission Allowances 39,634 53,560 Unrecovered Purchased Gas Costs 32,412 33,128 Other Current Assets 61,359 59,660 Total Current Assets 1,150,345 522,449 Other Assets: Recoverable Future Taxes 125,576 121,992 Unamortized Debt Expense 9,308 10,589 Other Regulatory Assets 58,075 60,145 Deferred Charges 77,542 59,939 Other Investments 96,566 149,632 Goodwill 5,476 5,476 Prepaid Pension and Post-Retirement Benefit Costs 187,692 149,151 Fair Value of Derivative Financial Instruments 12,571 — Other 3,487 1,169 Total Other Assets 576,293 558,093 Total Assets $ 8,112,086 $ 7,464,825 CAPITALIZATION AND LIABILITIES Capitalization: Comprehensive Shareholders' Equity Common Stock, $1 Par Value Authorized - 200,000,000 Shares; Issued and Outstanding - 91,465,569 Shares and 91,181,549 Shares, Respectively $ 91,466 $ 91,182 Paid in Capital 1,022,954 1,017,446 Earnings Reinvested in the Business 1,472,395 1,191,175 Accumulated Other Comprehensive Loss (582,868 ) (513,597 ) Total Comprehensive Shareholders' Equity 2,003,947 1,786,206 Long-Term Debt, Net of Current Portion and Unamortized Discount and Debt Issuance Costs 2,082,463 2,628,687 Total Capitalization 4,086,410 4,414,893 Current and Accrued Liabilities: Notes Payable to Banks and Commercial Paper 400,000 158,500 Current Portion of Long-Term Debt 549,000 — Accounts Payable 145,320 171,655 Amounts Payable to Customers 292 21 Dividends Payable 43,446 41,487 Interest Payable on Long-Term Debt 45,017 17,376 Customer Advances — 17,223 Customer Security Deposits 25,200 19,292 Other Accruals and Current Liabilities 254,383 194,169 Fair Value of Derivative Financial Instruments 703,788 616,410 Total Current and Accrued Liabilities 2,166,446 1,236,133 Other Liabilities: Deferred Income Taxes 767,207 660,420 Taxes Refundable to Customers 346,577 354,089 Cost of Removal Regulatory Liability 256,092 245,636 Other Regulatory Liabilities 199,094 200,643 Pension and Other Post-Retirement Liabilities 4,732 7,526 Asset Retirement Obligations 152,100 209,639 Other Liabilities 133,428 135,846 Total Other Liabilities 1,859,230 1,813,799 Commitments and Contingencies — — Total Capitalization and Liabilities $ 8,112,086 $ 7,464,825 NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended June 30, (Thousands of Dollars) 2022 2021 Operating Activities: Net Income Available for Common Stock $ 407,879 $ 276,685 Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:Gain on Sale of Assets (12,736 ) (51,066 ) Impairment of Oil and Gas Producing Properties — 76,152 Depreciation, Depletion and Amortization 275,681 251,632 Deferred Income Taxes 121,150 89,277 Premium Paid on Early Redemption of Debt — 15,715 Stock-Based Compensation 15,178 12,296 Reduction of Other Post-Retirement Regulatory Liability (18,533 ) — Other 27,527 7,795 Change in: Receivables and Unbilled Revenue (194,832 ) (40,733 ) Gas Stored Underground and Materials, Supplies and Emission Allowances 24,141 19,024 Unrecovered Purchased Gas Costs 716 — Other Current Assets (1,699 ) (4,282 ) Accounts Payable 19,259 7,474 Amounts Payable to Customers 271 (3,595 ) Customer Advances (17,223 ) (15,319 ) Customer Security Deposits 5,908 2,073 Other Accruals and Current Liabilities 61,322 23,154 Other Assets (44,184 ) 5,839 Other Liabilities (15,809 ) (311 ) Net Cash Provided by Operating Activities $ 654,016 $ 671,810 Investing Activities: Capital Expenditures $ (592,487 ) $ (512,775 ) Net Proceeds from Sale of Oil and Gas Producing Properties 254,439 — Net Proceeds from Sale of Timber Properties — 104,582 Sale of Fixed Income Mutual Fund Shares in Grantor Trust 30,000 — Other 13,528 11,223 Net Cash Used in Investing Activities $ (294,520 ) $ (396,970 ) Financing Activities: Changes in Notes Payable to Banks and Commercial Paper $ 241,500 $ (30,000 ) Reduction of Long-Term Debt — (515,715 ) Dividends Paid on Common Stock (124,701 ) (121,606 ) Net Proceeds From Issuance of Long-Term Debt — 495,267 Net Repurchases of Common Stock (9,387 ) (3,605 ) Net Cash Provided by (Used in) Financing Activities $ 107,412 $ (175,659 ) Net Increase in Cash, Cash Equivalents, and Restricted Cash 466,908 99,181 Cash, Cash Equivalents, and Restricted Cash at Beginning of Period 120,138 20,541 Cash, Cash Equivalents, and Restricted Cash at June 30 $ 587,046 $ 119,722 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 2022 2021 Variance 2022 2021 Variance Total Operating Revenues $ 252,638 $ 209,535 $ 43,103 $ 758,428 $ 621,116 $ 137,312 Operating Expenses: Operation and Maintenance: General and Administrative Expense 26,844 16,165 10,679 63,396 51,017 12,379 Lease Operating and Transportation Expense 79,529 66,708 12,821 221,213 199,296 21,917 All Other Operation and Maintenance Expense 8,854 3,757 5,097 18,183 10,944 7,239 Property, Franchise and Other Taxes 7,114 6,853 261 19,888 15,918 3,970 Depreciation, Depletion and Amortization 55,136 45,886 9,250 155,190 137,356 17,834 Impairment of Oil and Gas Producing Properties — — — — 76,152 (76,152 ) 177,477 139,369 38,108 477,870 490,683 (12,813 ) Gain on Sale of Assets 12,736 — 12,736 12,736 — 12,736 Operating Income 87,897 70,166 17,731 293,294 130,433 162,861 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (186 ) (289 ) 103 (558 ) (860 ) 302 Interest and Other Income 482 18 464 613 176 437 Interest Expense on Long-Term Debt — — — — (15,119 ) 15,119 Interest Expense (14,589 ) (12,008 ) (2,581 ) (38,927 ) (42,601 ) 3,674 Income Before Income Taxes 73,604 57,887 15,717 254,422 72,029 182,393 Income Tax Expense 17,107 18,872 (1,765 ) 64,435 25,816 38,619 Net Income $ 56,497 $ 39,015 $ 17,482 $ 189,987 $ 46,213 $ 143,774 Net Income Per Share (Diluted) $ 0.61 $ 0.43 $ 0.18 $ 2.06 $ 0.50 $ 1.56 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 2022 2021 Variance 2022 2021 Variance Revenues from External Customers $ 67,236 $ 57,258 $ 9,978 $ 196,579 $ 175,881 $ 20,698 Intersegment Revenues 28,312 26,805 1,507 82,716 82,651 65 Total Operating Revenues 95,548 84,063 11,485 279,295 258,532 20,763 Operating Expenses: Purchased Gas (139 ) (11 ) (128 ) 1,298 219 1,079 Operation and Maintenance 24,639 22,918 1,721 71,249 63,809 7,440 Property, Franchise and Other Taxes 8,483 8,070 413 25,664 24,713 951 Depreciation, Depletion and Amortization 17,322 15,609 1,713 50,417 46,806 3,611 50,305 46,586 3,719 148,628 135,547 13,081 Operating Income 45,243 37,477 7,766 130,667 122,985 7,682 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit 767 125 642 2,302 376 1,926 Interest and Other Income 735 1,364 (629 ) 2,330 3,159 (829 ) Interest Expense (10,813 ) (10,070 ) (743 ) (31,564 ) (31,353 ) (211 ) Income Before Income Taxes 35,932 28,896 7,036 103,735 95,167 8,568 Income Tax Expense 9,333 6,948 2,385 26,499 24,107 2,392 Net Income $ 26,599 $ 21,948 $ 4,651 $ 77,236 $ 71,060 $ 6,176 Net Income Per Share (Diluted) $ 0.29 $ 0.24 $ 0.05 $ 0.84 $ 0.78 $ 0.06 Three Months Ended Nine Months Ended March 31, June 30, GATHERING SEGMENT 2022 2021 Variance 2022 2021 Variance Revenues from External Customers $ 2,862 $ 588 $ 2,274 $ 10,063 $ 1,610 $ 8,453 Intersegment Revenues 53,069 48,068 5,001 150,696 144,317 6,379 Total Operating Revenues 55,931 48,656 7,275 160,759 145,927 14,832 Operating Expenses: Operation and Maintenance 9,770 8,715 1,055 27,509 24,750 2,759 Property, Franchise and Other Taxes 10 12 (2 ) 12 30 (18 ) Depreciation, Depletion and Amortization 8,589 8,131 458 25,343 24,132 1,211 18,369 16,858 1,511 52,864 48,912 3,952 Operating Income 37,562 31,798 5,764 107,895 97,015 10,880 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (56 ) (68 ) 12 (168 ) (203 ) 35 Interest and Other Income 53 10 43 81 253 (172 ) Interest Expense on Long-Term Debt — — — — (965 ) 965 Interest Expense (4,164 ) (4,102 ) (62 ) (12,383 ) (12,435 ) 52 Income Before Income Taxes 33,395 27,638 5,757 95,425 83,665 11,760 Income Tax Expense 8,737 7,211 1,526 25,538 21,988 3,550 Net Income $ 24,658 $ 20,427 $ 4,231 $ 69,887 $ 61,677 $ 8,210 Net Income Per Share (Diluted) $ 0.27 $ 0.22 $ 0.05 $ 0.76 $ 0.67 $ 0.09 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 2022 2021 Variance 2022 2021 Variance Revenues from External Customers $ 179,888 $ 126,934 $ 52,954 $ 785,664 $ 586,618 $ 199,046 Intersegment Revenues 60 74 (14 ) 245 271 (26 ) Total Operating Revenues 179,948 127,008 52,940 785,909 586,889 199,020 Operating Expenses: Purchased Gas 95,587 44,848 50,739 448,268 255,011 193,257 Operation and Maintenance 47,176 43,296 3,880 148,885 141,412 7,473 Property, Franchise and Other Taxes 10,143 9,433 710 32,156 30,181 1,975 Depreciation, Depletion and Amortization 14,765 14,505 260 44,592 42,811 1,781 167,671 112,082 55,589 673,901 469,415 204,486 Operating Income 12,277 14,926 (2,649 ) 112,008 117,474 (5,466 ) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Credit (Costs) (2,678 ) (5,747 ) 3,069 6,018 (24,674 ) 30,692 Interest and Other Income 349 960 (611 ) 1,162 2,142 (980 ) Interest Expense (6,087 ) (5,510 ) (577 ) (17,115 ) (16,457 ) (658 ) Income Before Income Taxes 3,861 4,629 (768 ) 102,073 78,485 23,588 Income Tax Expense (Benefit) (761 ) (212 ) (549 ) 22,273 18,563 3,710 Net Income $ 4,622 $ 4,841 $ (219 ) $ 79,800 $ 59,922 $ 19,878 Net Income Per Share (Diluted) $ 0.05 $ 0.05 $ — $ 0.87 $ 0.65 $ 0.22 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 2022 2021 Variance 2022 2021 Variance Revenues from External Customers $ — $ (1 ) $ 1 $ — $ 1,174 $ (1,174 ) Intersegment Revenues — 2 (2 ) 6 22 (16 ) Total Operating Revenues — 1 (1 ) 6 1,196 (1,190 ) Operating Expenses: Purchased Gas — 4 (4 ) 6 2,297 (2,291 ) Operation and Maintenance — 17 (17 ) 5 701 (696 ) Property, Franchise and Other Taxes — — — — 47 (47 ) Depreciation, Depletion and Amortization — — — — 394 (394 ) — 21 (21 ) 11 3,439 (3,428 ) Gain on Sale of Assets — — — — 51,066 (51,066 ) Operating Income (Loss) — (20 ) 20 (5 ) 48,823 (48,828 ) Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs — — — — (7 ) 7 Interest and Other Income — 3 (3 ) 2 229 (227 ) Income (Loss) before Income Taxes — (17 ) 17 (3 ) 49,045 (49,048 ) Income Tax Expense (Benefit) — (1,056 ) 1,056 4 11,428 (11,424 ) Net Income (Loss) $ — $ 1,039 $ (1,039 ) $ (7 ) $ 37,617 $ (37,624 ) Net Income (Loss) Per Share (Diluted) $ — $ 0.01 $ (0.01 ) $ — $ 0.41 $ (0.41 ) Three Months Ended Nine Months Ended June 30, June 30, CORPORATE 2022 2021 Variance 2022 2021 Variance Revenues from External Customers $ — $ 83 $ (83 ) $ 166 $ 272 $ (106 ) Intersegment Revenues 1,082 1,027 55 3,247 2,718 529 Total Operating Revenues 1,082 1,110 (28 ) 3,413 2,990 423 Operating Expenses: Operation and Maintenance 3,195 5,224 (2,029 ) 10,039 11,566 (1,527 ) Property, Franchise and Other Taxes 124 124 — 373 370 3 Depreciation, Depletion and Amortization 45 39 6 139 133 6 3,364 5,387 (2,023 ) 10,551 12,069 (1,518 ) Operating Loss (2,282 ) (4,277 ) 1,995 (7,138 ) (9,079 ) 1,941 Other Income (Expense): Non-Service Pension and Post-Retirement Benefit Costs (1,017 ) (923 ) (94 ) (3,052 ) (2,769 ) (283 ) Interest and Other Income 31,019 33,433 (2,414 ) 92,937 107,728 (14,791 ) Interest Expense on Long-Term Debt (30,091 ) (30,220 ) 129 (90,300 ) (95,212 ) 4,912 Other Interest Expense (3,346 ) (236 ) (3,110 ) (4,948 ) (2,412 ) (2,536 ) Loss before Income Taxes (5,717 ) (2,223 ) (3,494 ) (12,501 ) (1,744 ) (10,757 ) Income Tax Benefit (1,499 ) (1,428 ) (71 ) (3,477 ) (1,940 ) (1,537 ) Net Income (Loss) $ (4,218 ) $ (795 ) $ (3,423 ) $ (9,024 ) $ 196 $ (9,220 ) Net Income (Loss) Per Share (Diluted) $ (0.05 ) $ (0.01 ) $ (0.04 ) $ (0.10 ) $ 0.01 $ (0.11 ) Three Months Ended Nine Months Ended June 30, June 30, INTERSEGMENT ELIMINATIONS 2022 2021 Variance 2022 2021 Variance Intersegment Revenues $ (82,523 ) $ (75,976 ) $ (6,547 ) $ (236,910 ) $ (229,979 ) $ (6,931 ) Operating Expenses: Purchased Gas (27,500 ) (26,104 ) (1,396 ) (80,404 ) (80,509 ) 105 Operation and Maintenance (55,023 ) (49,872 ) (5,151 ) (156,506 ) (149,470 ) (7,036 ) (82,523 ) (75,976 ) (6,547 ) (236,910 ) (229,979 ) (6,931 ) Operating Income — — — — — — Other Income (Expense): Interest and Other Deductions (35,117 ) (30,914 ) (4,203 ) (98,376 ) (100,628 ) 2,252 Interest Expense 35,117 30,914 4,203 98,376 100,628 (2,252 ) 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 2022 2021 (Decrease) 2022 2021 (Decrease) Capital Expenditures: Exploration and Production $ 131,776 (1) $ 94,152 (3) $ 37,624 $ 405,736 (1)(2) $ 263,763 (3)(4) $ 141,973 Pipeline and Storage 19,778 (1) 63,863 (3) (44,085 ) 58,243 (1)(2) 155,556 (3)(4) (97,313 ) Gathering 8,614 (1) 6,209 (3) 2,405 28,588 (1)(2) 25,628 (3)(4) 2,960 Utility 27,664 (1) 24,866 (3) 2,798 70,972 (1)(2) 66,691 (3)(4) 4,281 Total Reportable Segments 187,832 189,090 (1,258 ) 563,539 511,638 51,901 All Other — — — — — — Corporate 166 129 37 663 218 445 Eliminations — (1,898 ) 1,898 — (2,118 ) 2,118 Total Capital Expenditures $ 187,998 $ 187,321 $ 677 $ 564,202 $ 509,738 $ 54,464 (1) Capital expenditures for the quarter and nine months ended June 30, 2022, include accounts payable and accrued liabilities related to capital expenditures of $62.0 million, $5.2 million, $2.5 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 June 30, 2022, since they represent non-cash investing activities at that date.
(2) Capital expenditures for the nine months ended June 30, 2022, exclude capital expenditures of $47.9 million, $39.4 million, $4.8 million and $10.6 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, 2021 and paid during the nine months ended June 30, 2022. These amounts were excluded from the Consolidated Statement of Cash Flows at September 30, 2021, 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, 2022.
(3) Capital expenditures for the quarter and nine months ended June 30, 2021, include accounts payable and accrued liabilities related to capital expenditures of $49.7 million, $25.8 million, $0.9 million, and $5.1 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, 2021, since they represent non-cash investing activities at that date.
(4) Capital expenditures for the nine months ended June 30, 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 nine months ended June 30, 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 June 30, 2021.DEGREE DAYS Percent Colder (Warmer) Than: Three Months Ended June 30, Normal 2022 2021 Normal (1) Last Year (1) Buffalo, NY 912 797 794 (12.6 ) 0.4 Erie, PA 871 741 741 (14.9 ) — Nine Months Ended June 30, Buffalo, NY 6,455 5,662 5,693 (12.3 ) (0.5 ) Erie, PA 6,023 5,274 5,188 (12.4 ) 1.7 (1) Percents compare actual 2022 degree days to normal degree days and actual 2022 degree days to actual 2021 degree days.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Gas Production/Prices: Production (MMcf) Appalachia 88,888 79,314 9,574 253,842 236,429 17,413 West Coast 405 431 (26 ) 1,210 1,300 (90 ) Total Production 89,293 79,745 9,548 255,052 237,729 17,323 Average Prices (Per Mcf) Appalachia $ 5.50 $ 2.29 $ 3.21 $ 4.64 $ 2.25 $ 2.39 West Coast 10.29 5.36 4.93 10.04 5.83 4.21 Weighted Average 5.52 2.31 3.21 4.67 2.27 2.40 Weighted Average after Hedging 2.87 2.20 0.67 2.67 2.21 0.46 Oil Production/Prices: Production (Thousands of Barrels) Appalachia 7 1 6 8 2 6 West Coast 519 557 (38 ) 1,589 1,681 (92 ) Total Production 526 558 (32 ) 1,597 1,683 (86 ) Average Prices (Per Barrel) Appalachia $ 108.47 $ 42.09 $ 66.38 $ 104.83 $ 43.13 $ 61.70 West Coast 110.79 67.55 43.24 94.06 56.92 37.14 Weighted Average 110.76 67.52 43.24 94.11 56.90 37.21 Weighted Average after Hedging (1) 77.65 59.22 18.43 70.71 55.40 15.31 Total Production (MMcfe) 92,449 83,093 9,356 264,634 247,827 16,807 Selected Operating Performance Statistics: General & Administrative Expense per Mcfe (2) $ 0.19 $ 0.19 $ — $ 0.20 $ 0.21 $ (0.01 ) Lease Operating and Transportation Expense per Mcfe (2)(3) $ 0.86 $ 0.80 $ 0.06 $ 0.84 $ 0.80 $ 0.04 Depreciation, Depletion & Amortization per Mcfe (2) $ 0.60 $ 0.55 $ 0.05 $ 0.59 $ 0.55 $ 0.04 (1) Weighted average oil price after hedging for the three and nine months ended June 30, 2022 excludes a loss on discontinuance of crude oil cash flow hedges of $44,632.
(2) 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. General and Administrative Expense per Mcfe for the three and nine months ended June 30, 2022 excludes transaction and severance costs related to the California asset sale.(3) Amounts include transportation expense of $0.57 and $0.57 per Mcfe for the three months ended June 30, 2022 and June 30, 2021, respectively. Amounts include transportation expense of $0.56 and $0.57 per Mcfe for the nine months ended June 30, 2022 and June 30, 2021, respectively.
NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES EXPLORATION AND PRODUCTION INFORMATION Hedging Summary for Remaining Three Months of Fiscal 2022 Volume Average Hedge Price Gas Swaps NYMEX 53,580,000 MMBTU $ 2.76 / MMBTU Fixed Price Physical Sales 18,940,197 MMBTU $ 2.62 / MMBTU Total 72,520,197 MMBTU $ 2.72 / MMBTU Hedging Summary for Fiscal 2023 Volume Average Hedge Price Gas Swaps NYMEX 116,200,000 MMBTU $ 2.79 / MMBTU No Cost Collars 70,400,000 MMBTU $ 3.11 / MMBTU (Floor) / $3.64 / MMBTU (Ceiling) Fixed Price Physical Sales 73,107,694 MMBTU $ 2.44 / MMBTU Total 259,707,694 MMBTU Hedging Summary for Fiscal 2024 Volume Average Hedge Price Gas Swaps NYMEX 61,080,000 MMBTU $ 2.72 / MMBTU No Cost Collars 59,200,000 MMBTU $ 3.20 / MMBTU (Floor) / $3.78 / MMBTU (Ceiling) Fixed Price Physical Sales 60,223,801 MMBTU $ 2.22 / MMBTU Total 180,503,801 MMBTU Hedging Summary for Fiscal 2025 Volume Average Hedge Price Gas Swaps NYMEX 23,660,000 MMBTU $ 2.74 / MMBTU No Cost Collars 43,960,000 MMBTU $ 3.49 / MMBTU (Floor) / $4.65 / MMBTU (Ceiling) Fixed Price Physical Sales 57,180,046 MMBTU $ 2.21 / MMBTU Total 124,800,046 MMBTU Hedging Summary for Fiscal 2026 Volume Average Hedge Price Gas Swaps NYMEX 1,720,000 MMBTU $ 2.75 / MMBTU No Cost Collars 42,720,000 MMBTU $ 3.53 / MMBTU (Floor) / $4.76 / MMBTU (Ceiling) Fixed Price Physical Sales 60,185,049 MMBTU $ 2.30 / MMBTU Total 104,625,049 MMBTU Hedging Summary for Fiscal 2027 Volume Average Hedge Price No Cost Collars 3,560,000 MMBTU $ 3.53 / MMBTU (Floor) / $4.76 / MMBTU (Ceiling) Fixed Price Physical Sales 43,434,257 MMBTU $ 2.35 / MMBTU Total 46,994,257 MMBTU Hedging Summary for Fiscal 2028 Volume Average Hedge Price Fixed Price Physical Sales 11,850,451 MMBTU $ 2.48 / MMBTU Hedging Summary for Fiscal 2029 Volume Average Hedge Price Fixed Price Physical Sales 766,673 MMBTU $ 2.54 / MMBTU NATIONAL FUEL GAS COMPANY AND SUBSIDIARIES Pipeline & Storage Throughput - (millions of cubic feet - MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Firm Transportation - Affiliated 19,558 19,202 356 94,213 92,290 1,923 Firm Transportation - Non-Affiliated 156,310 155,022 1,288 507,278 494,458 12,820 Interruptible Transportation 206 181 25 1,726 1,205 521 176,074 174,405 1,669 603,217 587,953 15,264 Gathering Volume - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Gathered Volume 109,797 91,817 17,980 314,625 275,283 39,342 Utility Throughput - (MMcf) Three Months Ended Nine Months Ended June 30, June 30, Increase Increase 2022 2021 (Decrease) 2022 2021 (Decrease) Retail Sales: Residential Sales 10,344 9,776 568 59,865 57,241 2,624 Commercial Sales 1,511 1,369 142 8,977 8,206 771 Industrial Sales 74 65 9 466 441 25 11,929 11,210 719 69,308 65,888 3,420 Transportation 12,936 13,298 (362 ) 56,274 55,815 459 24,865 24,508 357 125,582 121,703 3,879 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 nine months ended June 30, 2022 and 2021:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands except per share amounts) 2022 2021 2022 2021 Reported GAAP Earnings $ 108,158 $ 86,475 $ 407,879 $ 276,685 Items impacting comparability: Items related to West Coast asset sale: Gain on sale of West Coast assets (E&P) (12,736 ) — (12,736 ) — Tax impact of gain on sale of West Coast assets 3,225 — 3,225 — Loss from discontinuance of crude oil cash flow hedges (E&P) 44,632 — 44,632 — Tax impact of loss from discontinuance of crude oil cash flow hedges (11,303 ) — (11,303 ) — Transaction and severance costs (E&P) 9,693 — 9,693 — Tax impact of transaction and severance costs (2,455 ) — (2,455 ) — Total items impacting comparability related to West Coast asset sale 31,056 — 31,056 — Reduction of other post-retirement regulatory liability (Utility) — — (18,533 ) — Tax impact of reduction of other post-retirement regulatory liability — — 3,892 — Unrealized (gain) loss on other investments (Corporate/All Other) 3,434 (1,025 ) 10,093 (575 ) Tax impact of unrealized (gain) loss on other investments (721 ) 215 (2,120 ) 120 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 Premium paid on early redemption of debt — — — 15,715 Tax impact of premium paid on early redemption of debt — — — (4,321 ) Adjusted Operating Results $ 141,927 $ 85,665 $ 432,267 $ 305,799 Reported GAAP Earnings Per Share $ 1.17 $ 0.94 $ 4.43 $ 3.02 Items impacting comparability: Items related to West Coast asset sale: Gain on sale of West Coast assets, net of tax (E&P) (0.10 ) — (0.10 ) — Loss from discontinuance of crude oil cash flow hedges, net of tax (E&P) 0.36 — 0.36 — Transaction and severance costs, net of tax (E&P) 0.08 — 0.08 — Total items impacting comparability related to West Coast asset sale 0.34 — 0.34 — Reduction of other post-retirement regulatory liability, net of tax (Utility) — — (0.16 ) — Unrealized (gain) loss on other investments, net of tax (Corporate/All Other) 0.03 (0.01 ) 0.08 — 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 ) Premium paid on early redemption of debt, net of tax — — — 0.12 Adjusted Operating Results Per Share $ 1.54 $ 0.93 $ 4.69 $ 3.34 NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIESNON-GAAP FINANCIAL MEASURES (Continued)
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, 2022 and 2021:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands) 2022 2021 2022 2021 Reported GAAP Earnings $ 108,158 $ 86,475 $ 407,879 $ 276,685 Depreciation, Depletion and Amortization 95,857 84,170 275,681 251,632 Other (Income) Deductions 5,649 2,028 (3,291 ) 15,078 Interest Expense 33,973 31,232 96,861 115,926 Income Taxes 32,917 30,335 135,272 99,962 Impairment of Oil and Gas Producing Properties — — — 76,152 Gain on Sale of Assets (12,736 ) — (12,736 ) (51,066 ) Loss from discontinuance of crude oil cash flow hedges (E&P) 44,632 — 44,632 — Transaction and severance costs related to West Coast asset sale (E&P) 9,693 — 9,693 — Adjusted EBITDA $ 318,143 $ 234,240 $ 953,991 $ 784,369 Adjusted EBITDA by Segment Pipeline and Storage Adjusted EBITDA $ 62,565 $ 53,086 $ 181,084 $ 169,791 Gathering Adjusted EBITDA 46,151 39,929 133,238 121,147 Total Midstream Businesses Adjusted EBITDA 108,716 93,015 314,322 290,938 Exploration and Production Adjusted EBITDA 184,622 116,052 490,073 343,941 Utility Adjusted EBITDA 27,042 29,431 156,600 160,285 Corporate and All Other Adjusted EBITDA (2,237 ) (4,258 ) (7,004 ) (10,795 ) Total Adjusted EBITDA $ 318,143 $ 234,240 $ 953,991 $ 784,369 NATIONAL FUEL GAS COMPANY
AND SUBSIDIARIES
NON-GAAP FINANCIAL MEASURES
SEGMENT ADJUSTED EBITDAThree Months Ended Nine Months Ended June 30, June 30, (in thousands) 2022 2021 2022 2021 Exploration and Production Segment Reported GAAP Earnings $ 56,497 $ 39,015 $ 189,987 $ 46,213 Depreciation, Depletion and Amortization 55,136 45,886 155,190 137,356 Other (Income) Deductions (296 ) 271 (55 ) 684 Interest Expense 14,589 12,008 38,927 57,720 Income Taxes 17,107 18,872 64,435 25,816 Impairment of Oil and Gas Producing Properties — — — 76,152 Gain on Sale of West Coast assets (12,736 ) — (12,736 ) — Loss from discontinuance of crude oil cash flow hedges 44,632 — 44,632 — Transaction and severance costs related to West Coast asset sale 9,693 — 9,693 — Adjusted EBITDA $ 184,622 $ 116,052 $ 490,073 $ 343,941 Pipeline and Storage Segment Reported GAAP Earnings $ 26,599 $ 21,948 $ 77,236 $ 71,060 Depreciation, Depletion and Amortization 17,322 15,609 50,417 46,806 Other (Income) Deductions (1,502 ) (1,489 ) (4,632 ) (3,535 ) Interest Expense 10,813 10,070 31,564 31,353 Income Taxes 9,333 6,948 26,499 24,107 Adjusted EBITDA $ 62,565 $ 53,086 $ 181,084 $ 169,791 Gathering Segment Reported GAAP Earnings $ 24,658 $ 20,427 $ 69,887 $ 61,677 Depreciation, Depletion and Amortization 8,589 8,131 25,343 24,132 Other (Income) Deductions 3 58 87 (50 ) Interest Expense 4,164 4,102 12,383 13,400 Income Taxes 8,737 7,211 25,538 21,988 Adjusted EBITDA $ 46,151 $ 39,929 $ 133,238 $ 121,147 Utility Segment Reported GAAP Earnings $ 4,622 $ 4,841 $ 79,800 $ 59,922 Depreciation, Depletion and Amortization 14,765 14,505 44,592 42,811 Other (Income) Deductions 2,329 4,787 (7,180 ) 22,532 Interest Expense 6,087 5,510 17,115 16,457 Income Taxes (761 ) (212 ) 22,273 18,563 Adjusted EBITDA $ 27,042 $ 29,431 $ 156,600 $ 160,285 Corporate and All Other Reported GAAP Earnings $ (4,218 ) $ 244 $ (9,031 ) $ 37,813 Depreciation, Depletion and Amortization 45 39 139 527 Other (Income) Deductions 5,115 (1,599 ) 8,489 (4,553 ) Interest Expense (1,680 ) (458 ) (3,128 ) (3,004 ) Income Taxes (1,499 ) (2,484 ) (3,473 ) 9,488 Gain on Sale of Timber Properties — — — (51.066 ) Adjusted EBITDA $ (2,237 ) $ (4,258 ) $ (7,004 ) $ (10,795 ) Management defines free cash flow as funds from operations (net cash provided by operating activities less changes in working capital) 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.
Brandon J. Haspett Investor Relations 716-857-7697 Karen M. Camiolo Treasurer 716-857-7344
