Date of Report (Date of earliest event reported): October 25, 2001
NATIONAL FUEL GAS COMPANY
(Exact Name of Registrant as Specified in its Charter)
| New Jersey | 1-3880 | 13-1086010 |
|---|---|---|
| (State or Other Jurisdiction of | (Commission File | (I.R.S. Employer |
| Incorporation) | Number) | Identification No.) |
| 10 Lafayette Square, Buffalo New York | 14203 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant's telephone number, including area code: (716) 857-7000
N/A
(Former Name or Former Address, if Changed Since Last Report)
On October 25, 2001, National Fuel Gas Company (the “Company”) and its subsidiary, Seneca Resources Corporation (““Seneca”), issued press releases regarding their earnings for the fiscal year ended September 30, 2001. Copies of these press releases are hereby incorporated by reference and are filed as part of this Current Report as Exhibits 99(a) and 99(b), respectively.
Neither the filing of either press release as an exhibit to this Current Report nor the inclusion in any such press release of a reference to the Company’s internet address shall, under any circumstances, be deemed to incorporate the information available at such internet address into this Current Report. The information available at the Company’s internet address is not part of this Current Report or any other report filed by the Company with the Securities and Exchange Commission.
As disclosed in the attached press releases, the Company held a public conference call on October 26, 2001. During the course of that call, the Company indicated that the sensitivity of its projected fiscal 2002 earnings to changes in oil and natural gas prices from the Company’s stated assumptions is as follows: for every $1.00/BBL change in the weighted average price of oil for the year received by Seneca, the Company’s earnings per diluted share would move in the same direction by about $0.025 per diluted share, and for every $0.25/MCF change in the weighted average price of natural gas for the year received by Seneca, the Company’s earnings per diluted share would move in the same direction by about $0.035 per diluted share.
The Company also indicated in that call that one effect of the non-cash write-down of Canadian oil and gas reserves described in the press releases would be to reduce the Company’s fiscal 2002 expense for depreciation, depletion and amortization by an amount which positively impacts the Company’s fiscal 2002 earnings by $0.10 per diluted share. The Company’s projection of fiscal 2002 earnings takes into account this effect of the write-down.
Certain statements contained herein and incorporated by reference from the press releases, including statements regarding earnings projections, are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995. There is no assurance that the Company’s earnings projections will in fact be achieved nor do these projections reflect any acquisitions or divestitures that may occur during fiscal 2002. While the Company’s expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, actual results may differ materially from those in the forward-looking statement. Furthermore, each forward-looking statement speaks only as of the date on which it is made, and the Company undertakes no obligation to update the statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of unanticipated events. 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 economic conditions including economic disruptions caused by terrorist activities, demographic patterns or weather conditions; changes in the availability and/or price of natural gas and oil; inability to obtain new customers or retain existing ones; significant changes in competitive conditions affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those affecting acquisitions, financings, allowed rates of return, industry and rate structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company’s ability to obtain funds from operations, debt or equity to finance needed capital expenditures and other investments; uncertainty of oil and gas reserve estimates; ability to successfully identify and finance oil and gas property acquisitions and ability to operate and integrate existing and any subsequently acquired business or properties; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company’s actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price of natural gas or oil and the related effect given the accounting treatment or valuation of related derivative financial instruments; inability of the various counterparties to meet their obligations with respect to the Company’s financial instruments; regarding foreign operations - changes in foreign trade and monetary policies, laws, and regulations related to foreign operations, political and governmental changes, inflation and exchange rates, taxes and operating conditions; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company’s relationship with its employees and contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; or changes in accounting principles or the application of such principles to the Company. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Exhibit 99(a) - Press Release issued October 25, 2001 regarding National Fuel Gas Company
earnings
Exhibit 99(b) - Press Release issued October 25, 2001 regarding Seneca Resources Corporation
earnings
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
NATIONAL FUEL GAS COMPANY
By:/s/James R. Peterson
James R. Peterson
Assistant Secretary
EXHIBIT INDEX
Exhibit Number Description
99(a) Press Release issued October 25, 2001 regarding National
Fuel Gas Company earnings
99(b) Press Release issued October 25, 2001 regarding Seneca
Resources Corporation earnings
Financial
News
10 Lafayette Square/Buffalo, NY 14203
Margaret M. Suto
Investor Relations
716-857-6987
Joseph Pawlowski
Treasurer
716-857-6904
RELEASE DATE: Immediate October 25, 2001
Buffalo, New York: National Fuel Gas Company (National Fuel) (NYSE:NFG) today reported for the fiscal year ended September 30, 2001 annual earnings of $169.5 million, or $2.11 per diluted share, exclusive of a non-cash write-down of Seneca Resources Corporation’s (Seneca) (a wholly-owned subsidiary of National Fuel) oil and gas assets in the amount of $104.0 million (after tax) or $1.29 per diluted share. This represents a 33% increase over fiscal 2000 earnings of $127.2 million, or $1.61 per diluted share.
Philip C. Ackerman, President and Chief Executive Officer of National Fuel, remarked: “Our earnings results this year continue to demonstrate the value of being an integrated energy company. Strong performance in our major business segments provided sound returns for our shareholders, as we continue to meet the challenges of an increasingly competitive marketplace.” Ackerman continued, “These results would not have been accomplished without the extraordinary efforts of all National Fuel employees, in both our domestic and international regions. Their sustained commitment to our customers and shareholders is to be commended.”
Earnings for the quarter ended September 30, 2001 were $4.7 million, or $0.06 per diluted share, exclusive of the oil and gas write-down noted above. This compares with earnings of $2.2 million, or $0.03 per diluted share, for the quarter ended September 30, 2000.
The increase in earnings of $2.5 million for the quarter as compared with the prior year’s quarter (exclusive of the write-down of oil and gas properties) was the result of a smaller loss in the Utility segment (which typically incurs a loss in the summer quarter) and higher earnings in the Pipeline and Storage segment. These increased earnings were offset in part by losses in the Energy Marketing and International segments. Earnings in the Exploration and Production segment (exclusive of the write-down of oil and gas properties) were slightly lower than the prior year’s quarter.
The decrease in the market price of National Fuel’s stock during the quarter ended September 30, 2001 carried with it the required recognition of $5.3 million (after tax) of income for stock appreciation rights (“SARs”). This income, which is reflected as a reduction to operations and maintenance expense, is spread across all segments, with the greatest impact on the larger segments. For the fiscal year, the income related to SARs was $8.9 million (after tax) because of the stock price decrease from September 30, 2000 to September 30, 2001. As recently reported, National Fuel’s shareholders approved compensation plan amendments which will, among other things, result in the conversion of virtually all of the SARs into a different form of incentive compensation and eliminate all future awards of SARs under those plans.*
The Utility segment’s fourth quarter fiscal 2001 loss was $3.2 million, a decrease of $8.0 million from the fourth quarter loss in fiscal 2000. The current quarter’s lower loss resulted mainly from SARs income and the fact that the fourth quarter of fiscal 2000 included various true-up adjustments related to the conclusion of a two year rate settlement in the Utility’s New York jurisdiction.
In the Pipeline and Storage segment, earnings of $6.1 million for the quarter ended September 30, 2001 were up $1.2 million compared to the fourth quarter of fiscal 2000 mostly because of SARs income, offset by higher operating expenses.
The Energy Marketing segment reported a $2.3 million loss in the fourth quarter of fiscal 2001 as compared with $0.2 million of net income in the prior year’s quarter. The current quarter’s decline in earnings resulted primarily from the fact that the prior year’s quarter included gains associated with the marking-to-market of a portion of the segment’s derivative activity.
The International segment’s loss for the fourth quarter of fiscal 2001 was $6.2 million, or $1.9 million higher than the loss from the prior year’s quarter. The increased loss was mainly the result of higher operations expense.
Seneca, which follows the full-cost method of accounting for its oil and gas operations, is required to perform a quarterly “ceiling test.” Under the ceiling test, the present value of future revenues from Seneca’s oil and gas reserves is compared (on a country by country basis) with the book value of those reserves at the balance sheet date. If the book value of the reserves in any country exceeds the present value of the associated future revenues, a non-cash charge must be recorded to write down the book value of the reserves to their present value. As a result of low oil and gas prices at September 30, 2001, Seneca was required to recognize a non-cash impairment relating to its Canadian properties of $180.8 million (pre-tax) or $104.0 million (after tax) for the quarter ended September 30, 2001.
Exclusive of the recently announced write-down of oil and gas properties, the Exploration and Production segment’s earnings for the quarter ended September 30, 2001 of $12.3 million were $0.7 million lower than the similar period in the prior year. Crude oil and natural gas production increases of 9% and 31%, respectively, were offset by a 22% decrease in the weighted average price (after hedging) received for crude oil production.
Earnings for the fiscal year ended September 30, 2001 increased by $42.3 million from the prior fiscal year, exclusive of the write-down of oil and gas properties. The increase was the result of higher earnings in the Exploration and Production, Utility, Pipeline and Storage, and Timber segments. Earnings were also positively impacted by a lower loss in the Energy Marketing segment. Higher earnings were offset by losses in the International and All Other categories.
In the Exploration and Production segment, earnings for the fiscal year ended September 30, 2001 were up $36.9 million from the prior year (exclusive of the write-down of oil and gas properties). This increase was the result of a 53% increase in crude oil production (largely attributable to the Canadian properties that National Fuel acquired in 2000 and 2001), combined with the significant increase in natural gas prices that was experienced for most of fiscal 2001.
In the Utility segment, earnings were up $3.0 million due to SARs income and the non-recurring true-up adjustments recorded in the fourth quarter of fiscal 2000, as previously discussed. These increases to earnings were offset by a rate decrease that went into effect October 1, 2000.
SARs income, higher efficiency gas revenue, and the buy-out by a customer of a long-term transportation contract were the primary contributors to the Pipeline and Storage segment’s $8.8 million increase in earnings.
Higher margins on timber sales and lower interest expense were the main contributors to the Timber segment’s $1.6 million increase in earnings.
The Energy Marketing segment’s fiscal 2001 loss was $4.4 million less than last year’s loss primarily due to the fact that last year’s results included a negative mark-to market adjustment on derivative financial instruments.
Lower heat and electric margins and higher operating costs were the principal factors behind the $3.0 million loss experienced by the International segment, a $6.3 million decline from the prior year’s earnings.
In the All Other category, the net loss is primarily the result of Upstate Energy, Inc.‘s second quarter inventory write-down.
National Fuel expects earnings for the fiscal year ending September 30, 2002 to fall within the range of $1.70 to $1.80 per diluted share.* The revised earnings guidance reflects the recent dramatic decrease in oil and gas prices.
The Company will host a conference call on Friday, October 26, 2001 at 11:00 a.m. (Eastern Time) to discuss this announcement. To access this call, please go to the Company’s home page at its website http://www.nationalfuelgas.com and click on the words “Conference Call”. For those without Internet access, you may call (toll-free) 1-888-769-8708 and use the pass code “National Fuel” for listen-only access to the live call. For those unable to listen to the live broadcast, a replay will be available at the same website beginning about one hour after the call. In addition, the call will be recorded and a toll-free replay will be available for playback by telephone approximately one hour after the call at 1-888-568-0352.
National Fuel is an integrated energy company with $3.4 billion in assets comprised of the following six operating segments: Utility, Pipeline and Storage, Exploration and Production, International, Energy Marketing, and Timber. Additional information about National Fuel is available on its Internet Web site: http://www.nationalfuelgas.com or through its investor information service at 1-800-334-2188.
__________
* Certain statements contained herein, including those which are designated with an “*", are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995 and 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 economic conditions including economic disruptions caused by terrorist activities, demographic patterns or weather conditions; changes in the availability and/or price of natural gas and oil; inability to obtain new customers or retain existing ones; significant changes in competitive conditions affecting the Company; governmental/regulatory actions, initiatives and proceedings, including those affecting acquisitions, financings, allowed rates of return, industry and rate structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company’s ability to obtain funds from operations, debt or equity to finance needed capital expenditures and other investments; uncertainty of oil and gas reserve estimates; ability to successfully identify and finance oil and gas property acquisitions and ability to operate and integrate existing and any subsequently acquired business or properties; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company’s actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price of natural gas or oil and the related effect given the accounting treatment or valuation of related derivative financial instruments; inability of the various counterparties to meet their obligations with respect to the Company’s financial instruments; regarding foreign operations - changes in foreign trade and monetary policies, laws, and regulations related to foreign operations, political and governmental changes, inflation and exchange rates, taxes and operating conditions; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company’s relationship with its employees and contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; or changes in accounting principles or the application of such principles to the Company. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited)
----------------------------- ------------------------------
SUMMARY OF OPERATIONS 2001 2000 2001 2000
---------------------
------------- -------------- ------------- ---------------
Operating Revenues $ 254,485 $ 249,278 $2,100,352 $ 1,425,277
------------- -------------- ------------- ---------------
Operating Expenses:
Purchased Gas 59,844 61,705 1,045,805 503,617
Fuel Used in Heat and Electric Generation 7,250 8,330 54,968 54,893
Operation and Maintenance 92,343 91,932 364,318 350,383
Property, Franchise and Other Taxes 16,318 17,684 83,730 78,878
Depreciation, Depletion and Amortization 51,221 39,484 174,914 142,170
Impairment of Oil and Gas Producing Properties 180,781 - 180,781 -
Income Taxes - Current (9,481) (27,235) 92,955 35,210
- Deferred (64,224) 30,464 (55,849) 41,858
------------- -------------- ------------- ---------------
334,052 222,364 1,941,622 1,207,009
------------- -------------- ------------- ---------------
Operating Income (79,567) 26,914 158,730 218,268
Other Income 2,143 2,772 15,256 10,408
------------- -------------- ------------- ---------------
Income Before Interest Charges and Minority
Interest in Foreign Subsidiaries (77,424) 29,686 173,986 228,676
Interest Charges 22,691 28,339 107,145 100,085
Minority Interest in Foreign Subsidiaries 736 871 (1,342) (1,384)
------------- -------------- ------------- ---------------
Net Income Available for Common Stock $ (99,379) $ 2,218 $ 65,499 $ 127,207
============= ============== ============= ===============
Earnings Per Common Share:
Basic $ (1.25) $ 0.03 $ 0.83 $ 1.63
============= ============== ============= ===============
Diluted $ (1.24) $ 0.03 $ 0.82 $ 1.61
============= ============== ============= ===============
Weighted Average Common Shares:
Used in Basic Calculation 79,339,051 78,581,532 79,053,444 78,233,842
============= ============== ============= ===============
Used in Diluted Calculation 80,181,539 79,860,360 80,361,258 79,166,200
============= ============== ============= ===============
Page 6
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited)
------------------------------------------- -------------------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
------------- -------------- -------------- ------------- ------------- -------------------
Operating Revenues
------------------
Utility $ 102,674 $ 102,419 $ 255 $1,234,647 $ 846,459 $ 388,188
Pipeline and Storage 38,406 41,459 (3,053) 171,091 169,659 1,432
Exploration and Production 92,823 84,255 8,568 398,344 238,070 160,274
International 11,084 11,751 (667) 97,910 104,736 (6,826)
Energy Marketing 24,621 25,368 (747) 259,206 133,929 125,277
Timber 8,594 8,239 355 42,091 39,172 2,919
------------- -------------- -------------- ------------- ------------- -------------------
Total Reportable Segments 278,202 273,491 4,711 2,203,289 1,532,025 671,264
All Other 828 39 789 18,322 5,345 12,977
Intersegment Eliminations (24,545) (24,252) (293) (121,259) (112,093) (9,166)
------------- -------------- -------------- ------------- ------------- -------------------
Total Consolidated $ 254,485 $ 249,278 $ 5,207 $2,100,352 $1,425,277 $ 675,075
============= ============== ============== ============= ============= ===================
Operating Income (Loss)
Before Income Taxes
--------------------
Utility $ (3,264) $ (11,429) $ 8,165 $ 129,081 $ 126,157 $ 2,924
Pipeline and Storage 13,432 11,224 2,208 77,086 65,155 11,931
Exploration and Production (1) (149,481) 35,571 (185,052) (14,221) 94,908 (109,129)
International (7,209) (5,016) (2,193) 6,605 12,938 (6,333)
Energy Marketing (3,900) 420 (4,320) (4,368) (12,000) 7,632
Timber 970 866 104 12,852 11,220 1,632
------------- -------------- -------------- ------------- ------------- -------------------
Total Reportable Segments (149,452) 31,636 (181,088) 207,035 298,378 (91,343)
All Other (2,120) (870) (1,250) (7,792) (425) (7,367)
Corporate (1,700) (623) (1,077) (3,407) (2,617) (790)
------------- -------------- -------------- ------------- ------------- -------------------
Total Consolidated $ (153,272) $ 30,143 $ (183,415) $ 195,836 $ 295,336 $ (99,500)
============= ============== ============== ============= ============= ===================
Net Income
----------
Utility $ (3,165) $ (11,182) $ 8,017 $ 60,707 $ 57,662 $ 3,045
Pipeline and Storage 6,063 4,852 1,211 40,377 31,614 8,763
Exploration and Production (1) (91,739) 12,967 (104,706) (32,284) 34,877 (67,161)
International (6,184) (4,324) (1,860) (3,042) 3,282 (6,324)
Energy Marketing (2,333) 152 (2,485) (3,432) (7,790) 4,358
Timber 352 (42) 394 7,715 6,133 1,582
------------- -------------- -------------- ------------- ------------- -------------------
Total Reportable Segments (97,006) 2,423 (99,429) 70,041 125,778 (55,737)
All Other (958) (582) (376) (4,277) (371) (3,906)
Corporate (1,415) 377 (1,792) (265) 1,800 (2,065)
------------- -------------- -------------- ------------- ------------- -------------------
Total Consolidated $ (99,379) $ 2,218 $ (101,597) $ 65,499 $ 127,207 $ (61,708)
============= ============== ============== ============= ============= ===================
(1) Three and Twelve Months Ended September 30, 2001 include noncash impairment charge of $180,781,000 pre tax ($104,040,000 after tax).
Three Months Ended Twelve Months Ended
September 30, September 30,
(Unaudited)
-------------------------------------------- ----------------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
------------- -------------- -------------- ------------- ------------- --------------
Depreciation, Depletion
and Amortization:
------------------
Utility $ 9,243 $ 8,927 $ 316 $ 36,607 $ 35,842 $ 765
Pipeline and Storage 5,621 5,765 (144) 23,746 23,379 367
Exploration and Production 31,521 21,526 9,995 98,408 69,583 28,825
International 3,811 2,799 1,012 12,634 11,110 1,524
Energy Marketing 43 59 (16) 212 209 3
Timber 954 376 578 3,186 1,948 1,238
------------- -------------- -------------- ------------- ------------- --------------
Total Reportable Segments 51,193 39,452 11,741 174,793 142,071 32,722
All Other 27 31 (4) 119 97 22
Corporate 1 1 - 2 2 -
------------- -------------- -------------- ------------- ------------- --------------
Total Consolidated $ 51,221 $ 39,484 $ 11,737 $ 174,914 $ 142,170 $ 32,744
============= ============== ============== ============= ============= ==============
Expenditures for
Long-Lived Assets
------------------
Utility $ 13,760 $ 12,698 $ 1,062 $ 42,374 $ 55,799 $ (13,425)
Pipeline and Storage 7,021 6,266 755 25,978 35,806 * (9,828)
Exploration and Production 70,149 59,836 10,313 296,419 280,049 16,370
International 3,530 3,460 70 15,585 9,767 5,818
Energy Marketing 65 70 (5) 116 89 27
Timber 345 2,128 (1,783) 3,694 13,542 (9,848)
------------- -------------- -------------- ------------- ------------- --------------
Total Reportable Segments 94,870 84,458 10,412 384,166 395,052 (10,886)
All Other 37 118 (81) 937 3,725 (2,788)
------------- -------------- -------------- ------------- ------------- --------------
Total Consolidated $ 94,907 $ 84,576 $ 10,331 $ 385,103 $ 398,777 $ (13,674)
============= ============== ============== ============= ============= ==============
* Includes $1.2 million in a stock-for-asset swap.
(Warmer) Than:
Three Months Ended September 30 Normal 2001 2000 Normal Last Year
-------------------------------
-------------- -------------- ------------- ------------- --------------
Buffalo, NY 196 145 222 (26.0) (34.7)
Erie, PA 100 168 179 68.0 (6.1)
Twelve Months Ended September 30
--------------------------------
Buffalo, NY 6,865 6,648 6,312 (3.2) 5.3
Erie, PA 6,179 6,351 5,657 2.8 12.3
Page 8
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------------------------- ------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ------------ ---------- ---------- ------------
Gas Production/Prices:
----------------------
Production (MMcf)
Gulf Coast 9,583 7,813 1,770 30,663 32,760 (2,097)
West Coast 1,207 1,072 135 4,383 4,374 9
Appalachia 1,068 1,092 (24) 4,142 4,344 (202)
Canada 1,475 175 1,300 1,816 192 1,624
---------- ----------- ------------ ---------- ---------- ------------
13,333 10,152 3,181 41,004 41,670 (666)
========== =========== ============ ========== ========== ============
Average Prices (Per Mcf)
Gulf Coast $ 2.94 $ 4.43 $ (1.49) $ 4.93 $ 3.29 $ 1.64
West Coast 3.84 5.48 (1.64) 10.18 3.62 6.56
Appalachia 4.32 3.81 0.51 5.03 3.16 1.87
Canada 1.89 2.51 (0.62) 2.41 2.52 (0.11)
Weighted Average 3.01 4.44 (1.43) 5.39 3.31 2.08
Weighted Average after Hedging 3.29 2.49 0.80 4.17 2.61 1.56
Oil Production/Prices:
----------------------
Production (Thousands of Barrels)
Gulf Coast 537 389 148 1,914 1,415 499
West Coast 719 718 1 2,875 2,824 51
Appalachia 2 2 - 7 9 (2)
Canada 786 771 15 3,061 899 2,162
---------- ----------- ------------ ---------- ---------- ------------
2,044 1,880 164 7,857 5,147 2,710
========== =========== ============ ========== ========== ============
Average Prices (Per Barrel)
Gulf Coast $25.28 $ 31.44 $ (6.16) $27.47 $ 28.27 $ (0.80)
West Coast 22.05 27.31 (5.26) 24.06 23.87 0.19
Appalachia 26.42 28.49 (2.07) 28.51 25.12 3.39
Canada 22.03 29.40 (7.37) 24.29 29.28 (4.99)
Weighted Average 22.90 29.02 (6.12) 24.99 26.03 (1.04)
Weighted Average after Hedging 21.47 27.41 (5.94) 21.59 22.85 (1.26)
Page 9
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------------------------- -----------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ----------- ----------- ------------ -------------
Residential Sales 5,039 5,430 (391) 73,530 68,196 5,334
Commercial Sales 750 887 (137) 13,831 12,312 1,519
Industrial Sales 621 1,347 (726) 4,089 4,276 (187)
---------- ----------- ----------- ----------- ------------ -------------
6,410 7,664 (1,254) 91,450 84,784 6,666
---------- ----------- ----------- ----------- ------------ -------------
Off-System Sales 2,759 1,917 842 12,736 12,833 (97)
Transportation 10,016 11,119 (1,103) 66,283 71,862 (5,579)
---------- ----------- ----------- ----------- ------------ -------------
19,185 20,700 (1,515) 170,469 169,479 990
========== =========== =========== =========== ============ =============
Pipeline &
Storage Throughput- (MMcf)
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------------------------- -----------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ----------- ----------- ------------ -------------
Firm Transportation - Affiliated 13,328 13,095 233 125,858 113,241 12,617
Firm Transportation - Non-Affiliated 42,818 41,149 1,669 178,325 178,577 (252)
Interruptible Transportation 2,553 14,531 (11,978) 17,372 21,730 (4,358)
---------- ----------- ----------- ----------- ------------ -------------
58,699 68,775 (10,076) 321,555 313,548 8,007
========== =========== =========== =========== ============ =============
Energy Marketing Volumes
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------------------------- -----------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ----------- ----------- ------------ -------------
Natural Gas (MMcf) 5,602 3,969 1,633 37,360 35,465 1,895
========== =========== =========== =========== ============ =============
International Sales Volumes
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------- -----------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ----------- ----------- ------------ -------------
Heating (Gigajoules) 825,596 757,717 67,879 9,978,118 10,222,024 (243,906)
========== =========== =========== =========== ============ =============
Electricity (Megawatt hours) 172,859 235,783 (62,924) 1,019,901 1,147,303 (127,402)
========== =========== =========== =========== ============ =============
Timber Board Feet (Thousands)
Three Months Ended Twelve Months Ended
September 30, September 30,
------------------------------------- -----------------------------------------
Increase Increase
2001 2000 (Decrease) 2001 2000 (Decrease)
---------- ----------- ----------- ----------- ------------ -------------
Log Sales 1,927 1,931 (4) 8,839 9,370 (531)
Green Lumber Sales 2,505 1,788 717 10,332 8,193 2,139
Kiln Dry Lumber Sales 2,202 1,644 558 8,804 6,987 1,817
---------- ----------- ----------- ----------- ------------ -------------
6,634 5,363 1,271 27,975 24,550 3,425
========== =========== =========== =========== ============ =============
Page 10
Quarter Ended September 30 (unaudited) 2001 2000
--------------------------------------
--------------------- ---------------------
Operating Revenues $ 254,485,000 $ 249,278,000
===================== =====================
Net Income Available for Common Stock $ (99,379,000) $ 2,218,000
===================== =====================
Earnings Per Common Share:
Basic $ (1.25) $ 0.03
===================== =====================
Diluted $ (1.24) $ 0.03
===================== =====================
Weighted Average Common Shares:
Used in Basic Calculation 79,339,051 78,581,532
===================== =====================
Used in Diluted Calculation 80,181,539 79,860,360
===================== =====================
Twelve Months Ended September 30
--------------------------------
Operating Revenues $2,100,352,000 $1,425,277,000
===================== =====================
Net Income Available for Common Stock $ 65,499,000 $ 127,207,000
===================== =====================
Earnings Per Common Share:
Basic $ 0.83 $ 1.63 83
===================== =====================
Diluted $ 0.82 $ 1.61 82
===================== =====================
Weighted Average Common Shares:
Used in Basic Calculation 79,053,444 78,233,842
===================== =====================
Used in Diluted Calculation 80,361,258 79,166,200
===================== =====================
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Financial
News
10 Lafayette Square/Buffalo, NY 14203
Margaret M. Suto
Investor Relations
716-857-6987
Joseph Pawlowski
Treasurer
716-857-6904
RELEASE DATE: Immediate October 25, 2001
(October 25, 2001) BUFFALO, NEW YORK: Seneca Resources Corporation (“Seneca”), the exploration and production subsidiary of National Fuel Gas Company (NYSE: NFG), today announced earnings for its fourth quarter and fiscal year, both of which ended September 30, 2001. The company also disclosed the impact of a non-cash write-down to its fourth quarter.
For the third consecutive year, Seneca experienced record earnings. Total revenues for fiscal 2001 were $398.3 million, a 67 percent increase over fiscal 2000 total revenues of $238.1 million. Exclusive of the impact of the non-cash write-down, net income also increased by 106 percent, from $34.9 million in fiscal 2000 to $71.8 million, or $0.89 per diluted share after the two-for-one stock split, in fiscal 2001. Production was 88.1 billion cubic feet equivalent (BCFE), up 21 percent from last year’s production of 72.6 BCFE.
Earnings for the fourth quarter of fiscal 2001 reached a record in total revenue of $92.8 million, a 10 percent increase over the fourth quarter of fiscal 2000, when total revenue was $84.3 million. Exclusive of the impact of the non-cash write-down, net income decreased by 5 percent to $12.3 million, as compared to the fourth quarter of fiscal 2000 at $13.0 million. Production increased by 19 percent to 25.6 BCFE this quarter versus the 21.4 BCFE production in the fourth quarter of fiscal 2000.
Under the full cost method of accounting, a commonly-used technique employed by Seneca and other exploration and production companies, Seneca is required to perform a quarterly “ceiling test.” Under the ceiling test, the present value of future revenues from Seneca’s oil and gas reserves is compared (on a country-by-country basis) with the book value of those reserves at the balance sheet date. If the book value of the reserves in any country exceeds the present value of the associated future revenues, a non-cash charge must be recorded to write down the book value of the reserves to their present value. As a result of low oil and gas prices at September 30, 2001, Seneca was required to recognize a non-cash impairment relating to its
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Canadian properties of $180.8 million (pre-tax), or $104.0 million (after-tax), for the quarter ended September 30, 2001. Seneca’s Canadian operations will not be significantly affected by this write-down.* The company plans to drill 35 wells in Alberta and 25 wells in Saskatchewan during fiscal 2002.* This activity follows the drilling of 29 wells, of which 25 were successful, in these provinces during the fourth quarter of fiscal 2001 by Seneca’s subsidiary, National Fuel Exploration Corp.
As part of Seneca’s continuing efforts to reduce cost exposure in its offshore operations and maintain properties that better fit its economic profile, the company completed three strategic transactions in the fourth quarter. The transactions include two exchanges and a property sale.
In exchange for Seneca’s interest in South Timbalier Block 174 lying below 15,000 feet total vertical depth (TVD), Seneca received, from an undisclosed offshore operator, 100 percent of the interests in South Timbalier Blocks 239 and 248 from the surface to 13,000 feet TVD. This arrangement gives Seneca complete control of the shallower interval prospects under the three blocks and permits the commencement of drilling operations on this prospect, possibly as early as the first quarter of calendar 2002.*
Seneca also completed the transfer of all of its interest in the West Delta Block 30 Field to Maritech Resources, Inc., the wholly owned production and exploration subsidiary of TETRA Technologies, Inc. (NYSE: TTI). This field, because it is in the latter stages of its current producing life, is subject to higher than normal lease operating expenses and will be subject to significant plugging and abandonment obligations in the near future.* In connection with the sale, Seneca agreed to contribute specified amounts in connection with future plugging and abandonment obligations.* This sale frees Seneca from the ongoing operation of this property and from the contingencies that may exist in future plugging and abandonment operations.*
At West Cameron Block 294, Seneca sold its entire interest to an undisclosed party for $16.4 million, but retained a volume limited overriding royalty interest that is intended to maintain Seneca’s production level in the property during 2002.* This sale structure will allow the company to affect its cost profile without being subjected to an immediate impact on its production.*
Seneca’s exploration and development drilling programs posted positive results this quarter. The company drilled a total of 78 gross wells: 49 in the U.S. and 29 in Canada. Seven exploratory wells were drilled, of which five were successful, and 71 development wells were drilled, of which 68 were successful. Seneca’s success rate was 93% in the fourth quarter. For the fiscal year ended September 30, 2001, Seneca drilled a total of 246 gross wells with a 93% success rate.
Results from Seneca’s California properties continued to build upon increases experienced during previous quarters. Development at the Midway-Sunset and Lost Hills fields included drilling 24 new wells. Monthly production for the quarter increased to 306,800 barrels of oil equivalent (BOE) from 298,900 BOE last year. This increase was accomplished despite lower production from Midway-Sunset during the year while its steaming operations were curtailed due to high gas prices. Production at Midway-Sunset is now improving as steaming operations have fully recommenced.*
The outlook for fiscal 2002 is for continued growth in production through Seneca’s seventh straight year of production increases.* The forecast for production in fiscal 2002 is about 100 BCFE, with oil representing about 55 percent, assuming no production is curtailed.* Seneca previously announced that it would consider curtailing some of its production of natural gas if commodity prices for natural gas continue to decline.* The company’s 2002 pricing estimates for production, exclusive of hedging, are $2.70 per thousand cubic feet (MCF)for natural gas and $18.12 per barrel (BBL) for crude oil.* Production for 2002 has been hedged, with 63 percent of the expected gas production hedged at an average price of $3.86/MCF and 72 percent of the expected oil production hedged at an average price of $22.75/BBL. A detailed hedging summary can be found at the end of this press release and on Seneca’s Web site at www.srcx.com. Seneca’s anticipated capital budget for fiscal 2002 is $141 million and includes plans to drill approximately 175 new wells with activity focused in California, Canada and Pennsylvania.*
National Fuel is an integrated energy company with $3.4 billion in assets comprised of the following six operating segments: Utility, Pipeline and Storage, Exploration and Production, International, Energy Marketing and Timber. Seneca Resources Corporation, headquartered in Houston, Texas, explores for and produces natural gas and oil in the lower 48 states, the Gulf of Mexico, and Canada. Additional information is available via the Internet for National Fuel at http://www.nationalfuelgas.com, Seneca Resources at http://www.srcx.com, or through the company’s investor information service at 1-800-334-2188.
Certain statements contained herein, including those which are designated with an “*", are “forward-looking statements” as defined by the Private Securities Litigation Reform Act of 1995 and 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 economic conditions including economic disruptions caused by terrorist activities, demographic patterns or weather conditions; changes in the availability and/or price of natural gas and oil; inability to obtain new customers or retain existing ones; significant changes in competitive conditions affecting the Company; governmental/regulatory
actions, initiatives and proceedings, including those affecting acquisitions, financings, allowed rates of return, industry and rate structure, franchise renewal, and environmental/safety requirements; unanticipated impacts of restructuring initiatives in the natural gas and electric industries; significant changes from expectations in actual capital expenditures and operating expenses and unanticipated project delays or changes in project costs; the nature and projected profitability of pending and potential projects and other investments; occurrences affecting the Company’s ability to obtain funds from operations, debt or equity to finance needed capital expenditures and other investments; uncertainty of oil and gas reserve estimates; ability to successfully identify and finance oil and gas property acquisitions and ability to operate and integrate existing and any subsequently acquired business or properties; ability to successfully identify, drill for and produce economically viable natural gas and oil reserves; significant changes from expectations in the Company’s actual production levels for natural gas or oil; changes in the availability and/or price of derivative financial instruments; changes in the price of natural gas or oil and the related effect given the accounting treatment or valuation of related derivative financial instruments; inability of the various counterparties to meet their obligations with respect to the Company’s financial instruments; regarding foreign operations - changes in foreign trade and monetary policies, laws, and regulations related to foreign operations, political and governmental changes, inflation and exchange rates, taxes and operating conditions; significant changes in tax rates or policies or in rates of inflation or interest; significant changes in the Company’s relationship with its employees and contractors and the potential adverse effects if labor disputes, grievances or shortages were to occur; or changes in accounting principles or the application of such principles to the Company. The Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
4th Quarter Results Fiscal Year End Results
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2001* 2000 Increase/ 2001* 2000 Increase/
(Decrease) (Decrease)
Financial Results*
(in millions of dollars)
Revenue $92.8 $84.3 10% $398.3 $238.1 67%
Operating Expenses $61.5 $48.7 26% $231.8 $143.2 62%
EBITDA $62.8 $57.1 10% $265.0 $164.5 61%
Operating Income (before
income taxes) $31.3 $35.6 (12%) $166.6 $94.9 75%
Net Income $12.3 $13.0 (5%) $71.8 $34.9 106%
Operating Performance Statistics
Production (BCFE) 25.6 21.4 19% 88.1 72.6 21%
Operating Performance
General & Administrative
Expense/MCFe $0.24 $0.25 (4%) $0.25 $0.20 25%
Lease Operating
Expense/MCFe $0.71 $0.74 (4%) $0.73 $0.58 26%
Depreciation, Depletion
& Amortization/MCFe $1.23 $1.00 23% $1.12 $0.96 17%
Commodity Prices (Before Hedging)
Avg. Oil Price/barrel $22.90 $29.02 (21%) $24.99 $26.03 (4%)
Avg. Gas Price/MCF $3.01 $4.44 (32%) $5.39 $3.31 63%
Commodity Prices (After Hedging)
Avg. Oil Price/barrel $21.47 $27.41 (22%) $21.59 $22.85 (6%)
Avg. Gas Price/MCF $3.29 $2.49 32% $4.17 $2.61 60%
* Before write-down.
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Seneca Resources Earnings
October 25, 2001
Page 6
Hedging Summary for Fiscal 2002
SWAPs Volume Average Hedge Price
----- ------ -------------------
Oil 4.8 MMBBL $22.98/BBL
Gas 26.4 BCF $3.82/MCF
PUTS Volume Average Hedge Price
---- ------ -------------------
Oil - -
Gas 2.5 BCF $4.12/MCF
No-cost Collars Volume Floor Price Ceiling Price
--------------- ------ ----------- -------------
Oil 1.3 MMBBL $21.91/BBL $28.26/BBL
Gas 2.8 BCF $4.11/MCF $5.61/MCF
Hedging Summary for Fiscal 2003
SWAPs Volume Average Hedge Price
----- ------ -------------------
Oil 1.8 MMBBL $19.93/BBL
Gas 1.1 BCF $2.80/MCF
PUTS Volume Average Hedge Price
---- ------ -------------------
Oil - -
Gas 0.2 BCF $3.98/MCF
No-cost Collars Volume Floor Price Ceiling Price
--------------- ------ ----------- -------------
Oil 1.1 MMBBL $21.96/BBL $26.41/BBL
Gas 6.2 BCF $4.05/MCF $5.28/MCF