Summary of Significant Accounting Policies

Principles of Consolidation. The Company consolidates all entities in which it has a controlling financial interest. All significant intercompany balances and transactions are eliminated.

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Earnings for Interim Periods. The Company, in its opinion, has included all adjustments (which consist of only normally recurring adjustments, unless otherwise disclosed in this Form 10-Q) that are necessary for a fair statement of the results of operations for the reported periods. The consolidated financial statements and notes thereto, included herein, should be read in conjunction with the financial statements and notes for the years ended September 30, 2014, 2013 and 2012 that are included in the Company's 2014 Form 10-K. The consolidated financial statements for the year ended September 30, 2015 will be audited by the Company's independent registered public accounting firm after the end of the fiscal year.

The earnings for the nine months ended June 30, 2015 should not be taken as a prediction of earnings for the entire fiscal year ending September 30, 2015. Most of the business of the Utility and Energy Marketing segments is seasonal in nature and is influenced by weather conditions. Due to the seasonal nature of the heating business in the Utility and Energy Marketing segments, earnings during the winter months normally represent a substantial part of the earnings that those segments are expected to achieve for the entire fiscal year. The Company’s business segments are discussed more fully in Note 7 – Business Segment Information.

Consolidated Statement of Cash Flows. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid debt instruments purchased with a maturity of generally three months or less to be cash equivalents.

Hedging Collateral Deposits. This is an account title for cash held in margin accounts funded by the Company to serve as collateral for hedging positions. In accordance with its accounting policy, the Company does not offset hedging collateral deposits paid or received against related derivative financial instruments liability or asset balances.

Gas Stored Underground - Current. In the Utility segment, gas stored underground – current is carried at lower of cost or market, on a LIFO method. Gas stored underground – current normally declines during the first and second quarters of the year and is replenished during the third and fourth quarters. In the Utility segment, the current cost of replacing gas withdrawn from storage is recorded in the Consolidated Statements of Income and a reserve for gas replacement is recorded in the Consolidated Balance Sheets under the caption “Other Accruals and Current Liabilities.” Such reserve, which amounted to $32.9 million at June 30, 2015, is reduced to zero by September 30 of each year as the inventory is replenished.

Property, Plant and Equipment. In the Company’s Exploration and Production segment, oil and gas property acquisition, exploration and development costs are capitalized under the full cost method of accounting. Under this methodology, all costs associated with property acquisition, exploration and development activities are capitalized, including internal costs directly identified with acquisition, exploration and development activities. The internal costs that are capitalized do not include any costs related to production, general corporate overhead, or similar activities. The Company does not recognize any gain or loss on the sale or other disposition of oil and gas properties unless the gain or loss would significantly alter the relationship between capitalized costs and proved reserves of oil and gas attributable to a cost center.

Capitalized costs include costs related to unproved properties, which are excluded from amortization until proved reserves are found or it is determined that the unproved properties are impaired. Such costs amounted to $177.5 million and $141.7 million at June 30, 2015 and September 30, 2014, respectively. All costs related to unproved properties are reviewed quarterly to determine if impairment has occurred. The amount of any impairment is transferred to the pool of capitalized costs being amortized.

Capitalized costs are subject to the SEC full cost ceiling test. The ceiling test, which is performed each quarter, determines a limit, or ceiling, on the amount of property acquisition, exploration and development costs that can be capitalized. The ceiling under this test represents (a) the present value of estimated future net cash flows, excluding future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, using a discount factor of 10%, which is computed by applying prices of oil and gas (as adjusted for hedging) to estimated future production of proved oil and gas reserves as of the date of the latest balance sheet, less estimated future expenditures, plus (b) the cost of unevaluated properties not being depleted, less (c) income tax effects related to the differences between the book and tax basis of the properties. The natural gas and oil prices used to calculate the full cost ceiling are based on an unweighted arithmetic average of the first day of the month oil and gas prices for each month within the twelve-month period prior to the end of the reporting period. If capitalized costs, net of accumulated depreciation, depletion and amortization and related deferred income taxes, exceed the ceiling at the end of any quarter, a permanent impairment is required to be charged to earnings in that quarter. The book value of the oil and gas properties exceeded the ceiling at March 31, 2015 as well as June 30, 2015. As such, the Company recognized pre-tax impairment charges of $588.7 million and $709.1 million for the quarter and nine months ended June 30, 2015, respectively. Deferred income tax benefits of $248.9 million and $299.8 million related to the impairment charges were also recognized for the quarter and nine months ended June 30, 2015, respectively. In adjusting estimated future cash flows for hedging under the ceiling test at March 31, 2015 and June 30, 2015, estimated future net cash flows were increased by $97.0 million and $168.0 million, respectively.

Accumulated Other Comprehensive Income (Loss). The components of Accumulated Other Comprehensive Income (Loss) and changes for the quarter and nine months ended June 30, 2015 and 2014, net of related tax effect, are as follows (amounts in parentheses indicate debits) (in thousands):



	Gains and Losses on Derivative Financial Instruments			Gains and Losses on Securities Available for Sale			Funded Status of the Pension and Other Post-Retirement Benefit Plans			Total
Three Months Ended June 30, 2015
Balance at April 1, 2015	$	174,413		$	8,296		$	(56,020	)	$	126,689
Other Comprehensive Gains and Losses Before Reclassifications	(5,423		)	57			—			(5,366		)
Amounts Reclassified From Other Comprehensive Income (Loss)	(29,075		)	—			—			(29,075		)
Balance at June 30, 2015	$	139,915		$	8,353		$	(56,020	)	$	92,248
Nine Months Ended June 30, 2015
Balance at October 1, 2014	$	43,659		$	8,382		$	(56,020	)	$	(3,979	)
Other Comprehensive Gains and Losses Before Reclassifications	170,719			(29		)	—			170,690
Amounts Reclassified From Other Comprehensive Income (Loss)	(74,463		)	—			—			(74,463		)
Balance at June 30, 2015	$	139,915		$	8,353		$	(56,020	)	$	92,248
Three Months Ended June 30, 2014
Balance at April 1, 2014	$	2,937		$	8,301		$	(56,293	)	$	(45,055	)
Other Comprehensive Gains and Losses Before Reclassifications	(5,565		)	771			—			(4,794		)
Amounts Reclassified From Other Comprehensive Income (Loss)	6,202			9			—			6,211
Balance at June 30, 2014	$	3,574		$	9,081		$	(56,293	)	$	(43,638	)
Nine Months Ended June 30, 2014
Balance at October 1, 2013	$	30,722		$	6,337		$	(56,293	)	$	(19,234	)
Other Comprehensive Gains and Losses Before Reclassifications	(42,935		)	2,735			—			(40,200		)
Amounts Reclassified From Other Comprehensive Income (Loss)	15,787			9			—			15,796
Balance at June 30, 2014	$	3,574		$	9,081		$	(56,293	)	$	(43,638	)

Reclassifications Out of Accumulated Other Comprehensive Income (Loss). The details about the reclassification adjustments out of accumulated other comprehensive income (loss) for the quarter and nine months ended June 30, 2015 and 2014 are as follows (amounts in parentheses indicate debits to the income statement) (in thousands):



Details About Accumulated Other Comprehensive Income (Loss) Components	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income (Loss)												Affected Line Item in the Statement Where Net Income (Loss) is Presented
	Three Months Ended June 30,						Nine Months Ended June 30,
	2015			2014			2015			2014
Gains (Losses) on Derivative Financial Instrument Cash Flow Hedges:
Commodity Contracts		$50,878			($14,547	)		$124,386			($27,372	)	Operating Revenues
Commodity Contracts	(3		)	83			4,884			(3,549		)	Purchased Gas
Gains (Losses) on Securities Available for Sale	—			(16		)	—			(16		)	Other Income
	50,875			(14,480		)	129,270			(30,937		)	Total Before Income Tax
	(21,800		)	8,269			(54,807		)	15,141			Income Tax Expense
		$29,075			($6,211	)		$74,463			($15,796	)	Net of Tax

Other Current Assets. The components of the Company’s Other Current Assets are as follows (in thousands):



	At June 30, 2015		At September 30, 2014

Prepayments	$	11,173	$	10,079
Prepaid Property and Other Taxes	11,061		13,743
Federal Income Taxes Receivable	—		8,211
Fair Values of Firm Commitments	11,078		—
Regulatory Assets	16,137		22,719
	$	49,449	$	54,752

Other Accruals and Current Liabilities. The components of the Company’s Other Accruals and Current Liabilities are as follows (in thousands):



	At June 30, 2015		At September 30, 2014

Accrued Capital Expenditures	$	76,242	$	80,348
Regulatory Liabilities	5,556		18,072
Reserve for Gas Replacement	32,908		—
Federal Income Taxes Payable	13,766		—
State Income Taxes Payable	1,763		5,798
Other	27,494		32,454
	$	157,729	$	136,672

Earnings Per Common Share. Basic earnings per common share is computed by dividing income available for common stock by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. For purposes of determining earnings per common share, the potentially dilutive securities the Company has outstanding are stock options, SARs, restricted stock units and performance shares. The diluted weighted average shares outstanding shown on the Consolidated Statements of Income reflects the potential dilution as a result of these securities as determined using the Treasury Stock Method. Stock options, SARs, restricted stock units and performance shares that are antidilutive are excluded from the calculation of diluted earnings per common share. There were 180,065 and 2,948 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2015, respectively. There were 338 and 829 securities excluded as being antidilutive for the quarter and nine months ended June 30, 2014, respectively.

Stock-Based Compensation. The Company granted 107,044 performance shares during the nine months ended June 30, 2015. The weighted average fair value of such performance shares was $65.26 per share for the nine months ended June 30, 2015. Performance shares are an award constituting units denominated in common stock of the Company, the number of which may be adjusted over a performance cycle based upon the extent to which performance goals have been satisfied. Earned performance shares may be distributed in the form of shares of common stock of the Company, an equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company. The performance shares do not entitle the participant to receive dividends during the vesting period.

Half of the performance shares granted during the nine months ended June 30, 2015 must meet a performance goal related to relative return on capital over the performance cycle of October 1, 2014 to September 30, 2017. The performance goal over the performance cycle is the Company’s total return on capital relative to the total return on capital of other companies in a group selected by the Compensation Committee (“Report Group”). Total return on capital for a given company means the average of the Report Group companies’ returns on capital for each twelve month period corresponding to each of the Company’s fiscal years during the performance cycle, based on data reported for the Report Group companies in the Bloomberg database. The number of these performance shares that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value of these performance shares is calculated by multiplying the expected number of shares that will be issued by the average market price of Company common stock on the date of grant reduced by the present value of forgone dividends over the vesting term of the award. The fair value is recorded as compensation expense over the vesting term of the award. The other half of the performance shares granted during the nine months ended June 30, 2015 must meet a performance goal related to relative total shareholder return over the performance cycle of October 1, 2014 to September 30, 2017. The performance goal over the performance cycle is the Company’s three-year total shareholder return relative to the three-year total shareholder return of the other companies in the Report Group. Three-year shareholder return for a given company will be based on the data reported for that company (with the starting and ending stock prices over the performance cycle calculated as the average closing stock price for the prior calendar month and with dividends reinvested in that company’s securities at each ex-dividend date) in the Bloomberg database. The number of these total shareholder return performance shares ("TSR performance shares") that will vest and be paid will depend upon the Company’s performance relative to the Report Group and not upon the absolute level of return achieved by the Company. The fair value price at the date of grant for the TSR performance shares is determined using a Monte Carlo simulation technique, which includes a reduction in value for the present value of forgone dividends over the vesting term of the award. This price is multiplied by the number of TSR performance shares awarded, the result of which is recorded as compensation expense over the vesting term of the award.

The Company granted 88,899 non-performance based restricted stock units during the nine months ended June 30, 2015. The weighted average fair value of such non-performance based restricted stock units was $64.04 per share for the nine months ended June 30, 2015. Restricted stock units represent the right to receive shares of common stock of the Company (or the equivalent value in cash or a combination of cash and shares of common stock of the Company, as determined by the Company) at the end of a specified time period. These non-performance based restricted stock units do not entitle the participant to receive dividends during the vesting period. The accounting for non-performance based restricted stock units is the same as the accounting for restricted share awards, except that the fair value at the date of grant of the restricted stock units must be reduced by the present value of forgone dividends over the vesting term of the award.

No stock options, SARs or restricted share awards were granted by the Company during the nine months ended June 30, 2015.

New Authoritative Accounting and Financial Reporting Guidance. In May 2014, the FASB issued authoritative guidance regarding revenue recognition. The authoritative guidance provides a single, comprehensive revenue recognition model for all contracts with customers to improve comparability. The revenue standard contains principles that an entity will apply to determine the measurement of revenue and timing of when it is recognized. The original effective date of this authoritative guidance was as of the Company's first quarter of fiscal 2018. However, the FASB has delayed the effective date of the new revenue standard by one year, and the guidance will now be effective as of the Company's first quarter of fiscal 2019. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.

In June 2014, the FASB issued authoritative guidance regarding accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the employee has completed the requisite service period. This authoritative guidance requires that such performance targets that affect vesting be treated as performance conditions, meaning that the performance target should not be factored in the calculation of the award at the grant date. Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2017, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.

In April 2015, the FASB issued authoritative guidance regarding the presentation of debt issuance costs. The authoritative guidance requires that all costs incurred to issue debt be presented in the balance sheet as a direct deduction from the carrying value of the debt. This authoritative guidance, which will be applied on a retrospective basis, will be effective as of the Company's first quarter of fiscal 2017, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.

In July 2015, the FASB issued authoritative guidance simplifying inventory measurement by requiring companies to value inventory at the lower of cost and net realizable value. The authoritative guidance applies to all inventory other than inventory that is measured using last-in, first-out or the retail inventory method. The intention of this authoritative guidance is to eliminate some diversity in practice. This authoritative guidance will be effective as of the Company's first quarter of fiscal 2018, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.