8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

August 4, 2010

Date of Report (Date of earliest event reported)

NORTHWEST NATURAL GAS COMPANY

(Exact name of registrant as specified in its charter)

Commission File No. 1-15973

Oregon	93-0256722
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

220 N.W. Second Avenue, Portland, Oregon 97209

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, including area code: (503) 226-4211

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operation and Financial Condition

On August 4, 2010, Northwest Natural Gas Company issued a press release announcing its earnings for the quarter ended June 30, 2010. A copy of the press release is attached as Exhibit 99.1.

The information contained in this Item 2.02 and in the accompanying exhibit shall not be incorporated by reference into any filing of NW Natural, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference to such filing. The information in this Item 2.02, including the exhibit hereto, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended.

Forward-Looking Statements

This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, estimated project expansion, project costs and completion dates, commodity costs, financial positions, customer growth, customer rates, depreciation rates, workforce levels or job creation, performance, regulatory actions, litigation, earnings expectations, expected dividend payout ratios, and other statements that are other than statements of historical facts.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A “Risk Factors”, and Part II, Item 7 and Item 7A “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosure about Market Risk” in the company’s most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk”, and Part II, Item 1A “Risk Factors”, in the company’s quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the company, also are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

The following exhibits are being furnished pursuant to Item 2.02 herein.

Exhibit	Description
99.1	Press Release of Northwest Natural Gas Company issued August 4, 2010 (furnished and not filed).

SIGNATURE

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 thereunto duly authorized.

	NORTHWEST NATURAL GAS COMPANY
	(Registrant)
Dated: August 4, 2010	/s/ David H. Anderson
	Senior Vice President and
	Chief Financial Officer

EXHIBIT INDEX

Exhibits	Description
99.1	Press Release of Northwest Natural Gas Company issued August 4, 2010 (furnished and not filed).

EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE: Aug. 4, 2010

NW Natural Reports Strong Results for the Quarter & Six Months

Ended June 30, 2010

Reaffirms Earnings Guidance of $2.60 to $2.75 Per Share

Financial & Operating Highlights

•        Reported earnings per share of 26 cents in the second quarter of 2010 on net income of $6.9 million. This compares to 12 cents per share on net income of $3.1 million in the second quarter of 2009.

•        Year-to-date earnings per share and net income were essentially the same in the 2010 and 2009 periods at $1.90 per share on net income of $50.5 million for the 2010 period, and $1.90 per share on net income of $50.4 million in 2009.

•        NW Natural selected a 90:10 incentive sharing mechanism in Oregon for the 2010-11 heating season, and anticipates flat or slightly decreased customer rates next year.

•        Operations and maintenance costs decreased 6 percent in 2010’s second quarter compared to 2009 and 8 percent for the year-to-date period.

•        Gill Ranch Storage construction is well underway, with start-up expected in October 2010.

•        Reaffirmed annual earnings guidance of $2.60 to $2.75 per share.

PORTLAND, ORE.—Northwest Natural Gas Company, dba NW Natural (NYSE: NWN), reported net income for the second quarter of 2010 of $6.9 million, compared to net income of $3.1 million in the same quarter of 2009. Earnings per share were 26 cents in the quarter, compared to 12 cents per share in the second quarter of 2009.

For the first six months of 2010, net income was $50.5 million, or $1.90 per share, compared to $1.90 per share on net income of $50.4 million in the first six months of 2009.

“Our second quarter results were strong, primarily due to weather that was 49 percent colder than last year and lower expenses,” said Gregg Kantor, NW Natural’s President and Chief Executive Officer. “I am pleased with our performance in the core utility and our ability to remain nimble as we pursue our non-utility projects.”

SECOND QUARTER FINANCIAL AND OPERATING RESULTS

Net income and earnings per share

Consolidated results of operations produced net income of $6.9 million, or 26 cents per share, compared to $3.1 million or 12 cents per share in the second quarter of 2009. Results from utility operations are typically low during the second quarter due to reduced use of natural gas in spring and early summer months. In this year’s quarter, however, temperatures were well below normal late in the quarter.

The company’s utility operations earned net income of $4.6 million (17 cents per share), compared to net income of $0.4 million (2 cents per share) in 2009. Gas storage also contributed net income of $2.1 million (8 cents per share), compared to $2.7 million (10 cents per share) last year. Other non-utility activities added $0.1 million (1 cent per share), compared to a small loss in 2009.

Customer growth

NW Natural’s customer growth for the trailing 12 month-period ending June 30, 2010 was 1.0 percent, with the company serving more than 669,000 customers. This compared to an annual customer growth rate of 0.7 percent at March 31, 2010, and 0.8 percent at June 30, 2009.

1

Operational results remain on target

NW Natural’s utility gas sales and transportation deliveries in the second quarter of 2010, excluding deliveries of gas stored for others, were 233 million therms, up 12 percent from 209 million therms in 2009. The increase in usage was due mainly to weather that was 49 percent colder than a year ago and 25 percent colder than average. Margin from utility operations in 2010’s second quarter increased 11 percent to $66.9 million from $60.1 million, with the increase mainly driven by higher usage among all categories of customers in the quarter, partially offset by lower gains from our gas cost incentive sharing mechanism in Oregon.

Volumes sold to residential and commercial customers in the second quarter of 2010 were 120 million therms, up 18 percent from 102 million therms in 2009, primarily due to colder weather and customer growth. Utility margin from residential and commercial customers in the quarter totaled $57.7 million compared to $49.7 million in the second quarter of 2009. The increase was due to colder weather. NW Natural’s weather normalization and decoupling mechanisms in Oregon adjusted margin down by $0.8 million in the second quarter of 2010, compared to a negative $0.1 million adjustment in the second quarter of 2009.

Gas deliveries to industrial customers in the second quarter were 113 million therms, compared to 108 million therms in 2009, up 5 percent, reflecting a slight improvement in the manufacturing sector over last year. Margin was up 9 percent to $7.1 million, reflecting the higher volumes and increases in higher margin rate schedules.

NW Natural provides gas storage services to customers in the interstate and intrastate markets from its Mist gas storage field in Oregon, primarily using storage capacity that has been developed in advance of core utility customers’ requirements. Earnings from gas storage in the second quarter of 2010 were $2.1 million (8 cents per share), compared to second quarter earnings in 2009 of $2.7 million (10 cents per share). These results include income from gas storage services as well as income from a contract with an unaffiliated energy marketing company that optimizes NW Natural’s unused storage and pipeline transportation capacity when these assets are not serving the company’s core utility customers. The decrease was mainly due to start-up expenditures at the Gill Ranch Storage facility.

2010-11 customer rate forecast and Oregon incentive sharing mechanism

Utility rates in Oregon and Washington are adjusted each year to reflect changes in the expected cost of natural gas purchases. The company expects gas rates for the coming heating season, starting Nov. 1, 2010, to remain relatively unchanged, or slightly lower, compared to the current heating season. In Oregon, the annual Purchased Gas Adjustment (PGA) mechanism includes an incentive commodity cost sharing component. The company has the option to select either an 80:20 or 90:10 percent customer and shareholder sharing component annually. In early August, the company selected a 90:10 percent sharing of higher or lower gas costs of unhedged gas purchases for the 2010-11 gas contract year. Results for the second quarter of 2010 included gas cost savings of approximately $0.5 million, compared to $2.6 million in 2009’s second quarter. There has been no change to the Washington PGA mechanism, which passes through 100 percent of all cost differences to customers.

Operations and maintenance costs

Operations and maintenance expenses in the second quarter of 2010 were $28.4 million, compared to $30.2 million in 2009. The main reason for the decrease was reduced payroll expense due to fewer employees in the current period compared to last year and lower bad debt expense.

YEAR-TO-DATE (SIX MONTH) FINANCIAL AND OPERATING HIGHLIGHTS

For the six-months ended June 30, 2010, net income was $50.5 million or $1.90 per share, which compares to $50.4 million or $1.90 per share for the same period in 2009. Year-to-date earnings were comparable to last year’s record earnings, partly due to colder weather in the second quarter than a year ago, and the net impact of the property tax ruling added $6.1 million (pre-tax) in the first quarter. Last year’s results benefitted significantly from higher gas cost savings of $11.1 million (pre-tax). Gas cost savings have totaled $0.7 million this year. In addition, the company benefited from a $4.0 million regulatory adjustment for income taxes paid versus collected in rates so far this year, compared to $2.9 million last year.

2

NW Natural’s utility operations contributed net income of $45.5 million ($1.71 per share), compared to $45.7 million ($1.72 per share), in the first six months of 2009. Gas storage contributed $4.6 million (18 cents per share), which compares to $4.8 million (18 cents per share) in the same period last year. Other non-utility activities contributed $0.3 million, compared to a negligible loss last year.

Operating results

NW Natural’s utility gas sales and transportation deliveries in the first six months of 2010, excluding deliveries of gas stored for others, were 567 million therms, compared to 621 million therms in 2009, due mainly to weather that was 4 percent warmer than last year and 3 percent warmer than average. Margin from utility operations was $192.4 million, compared to $198.2 million in 2009, due mainly to gas cost savings.

Gas sales to residential and commercial customers in the first six months of 2010 were 333 million therms, compared to 383 million therms in 2009, due primarily to weather that was significantly warmer in the first quarter of 2010, when weather has a larger impact on customer usage.

Gas deliveries to industrial customers in the first six months of 2010 were 234 million therms versus 237 million therms in the same period last year. Contribution to margin from sales and transportation in these markets was $14.2 million, compared to $13.9 million last year.

As noted earlier, during the first six months of the year, gas purchases were made at prices close to those embedded in rates. Under the company’s 90:10 sharing mechanism in Oregon for the current year, this contributed a $0.7 million benefit to margin in the first six months of 2010, compared to an $11.1 million benefit to margin in the first six months of 2009. In Washington, all gas costs are passed through to customers.

Regulatory adjustment for taxes paid

Based on NW Natural’s regulated operations through June 30, 2010, the company recognized $4.0 million of pre-tax income, representing a difference of $3.8 million of federal and state income taxes paid in excess of taxes collected in rates, plus accrued interest of $0.2 million. For the six months ended June 30, 2009, the company recognized pre-tax income of $2.9 million for this regulatory adjustment, which also included accrued interest of $0.2 million.

Operations and maintenance costs

Operations and maintenance costs for the six-months ended June 30, 2010 were $59.1 million versus $64.1 million in the 2009 period. The 8 percent O&M decrease was primarily due to lower payroll costs and lower accruals for bad debts. Bad debt expense as a percent of revenues billed remained well below 1 percent at 0.16 percent for the 12 months ended June 30, 2010.

Project development updates

The company’s underground gas storage development facility near Fresno, Calif., called Gill Ranch, began construction in January 2010. The project is being developed under a joint agreement with Pacific Gas & Electric. The company’s initial share of the project represents 75 percent of the total cost of the initial development, which includes an estimated 20 billion cubic feet (Bcf) of gas storage capacity and about 27 miles of gas transmission pipeline. The development of Gill Ranch remains on target to be in-service by October 2010. The company’s share of project costs remains estimated at between $185 million and $205 million.

Palomar update

NW Natural learned in May that the majority shipper on the Palomar pipeline and the company working to develop the Bradwood Landing liquefied natural gas (LNG) terminal along the Columbia River, suspended work on their project and filed for bankruptcy protection. Palomar Gas Holdings (PGH), of which NW Natural is a 50 percent owner with a subsidiary of TransCanada, is evaluating the impact of the bankruptcy on the development of a pipeline, through its subsidiary Palomar, to connect TransCanada’s intrastate pipeline in Central Oregon, with NW Natural’s distribution system in the Willamette Valley. In July, Palomar provided an update on the project’s status to the Federal Energy Regulatory Commission (FERC). Palomar is continuing to work on permitting activities and on parts of its permit application with FERC, as well as holding discussions with prospective regional shippers to evaluate and focus on the east segment of this key regional infrastructure project.

3

Income tax expense

Income taxes increased $4.1million in the six months ended June 30, 2010 compared to 2009, primarily due to a higher corporate income tax rate in Oregon and an increase in the amortization of regulatory tax assets, which are essentially covered in utility rates or the regulatory adjustment for taxes paid. The current effective tax rate in 2010 is 40.5 percent, up from 37.5 percent for the same period in 2009.

Cash flows and capital structure

Cash provided by operations in the first six months of 2010 was $104.3 million, compared to $199.8 million in 2009. The decrease is principally related to temporary differences in deferred gas costs and other working capital amounts. Cash requirements for investing activities totaled $90.4 million, up from $58.6 million in the same period of 2009, with the increase primarily reflecting Gill Ranch development costs.

NW Natural’s capitalization at June 30, 2010, reflected 48.2 percent common equity, 41.2 percent long-term debt and 10.6 percent short-term debt and current maturities of long-term debt. This compared to 49.2 percent common equity, 44.0 percent long-term debt and 6.8 percent short-term debt at June 30, 2009.

Outlook for 2010 reaffirmed

NW Natural today reaffirmed that it expects full-year 2010 earnings per share guidance will be in the range of $2.60 to $2.75. The company’s earnings guidance assumes normal weather conditions, continued customer growth, no significant changes in prevailing regulatory policies and no material earnings impact from the Gill Ranch storage project. The company’s outlook does not include forecasts of future gains or losses that may occur from the company’s commodity cost sharing mechanism in Oregon, since the company cannot predict future gas cost increases or decreases with reasonable certainty. The company continues to target a dividend payout ratio of 60 to 70 percent of earnings.

Dividend declaration

The Board of Directors of Northwest Natural Gas Company has declared a quarterly dividend of 41.5 cents a share on the company’s common stock. The dividends will be paid Aug. 13, 2010, to shareholders of record on July 30, 2010. The indicated annual dividend rate is $1.66 per share.

Presentation of results

In addition to presenting results of operations and earnings amounts in total, NW Natural has expressed certain measures in this press release on an equivalent cents per share basis. These amounts reflect factors that directly impact the company’s earnings. In calculating these financial measures, we allocate income tax expense based on the effective tax rate. NW Natural believes this per share information is useful because it enables readers to better understand the impact of these factors on its earnings.

Conference call arrangements

As previously reported, NW Natural will conduct a conference call and webcast starting at 8 a.m. Pacific Time (11 a.m. Eastern Time) on August 4th, to review the company’s 2010 second quarter and year-to-date financial and operating results.

To hear the conference call live, please dial 1-877-317-6789 within the United States, and 1-412-317-6789 from international locations. From Canada, please dial 1-866-605-3852. The pass code is 442257#.

To access the replay recording, please call 1-877-344-7529 and enter the conference identification pass code (442257#). To hear the replay from all international locations, please dial 1-412-317-0088.

To hear the conference by webcast, log on to NW Natural’s corporate website at www.nwnatural.com or through www.InvestorCalendar.com.

4

Forward-Looking statements

This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipates,” “intends,” “plans,” “seeks,” “believes,” “estimates,” “expects” and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, estimated project expansion, project costs and completion dates, commodity costs, financial positions, customer growth, customer rates, depreciation rates, workforce levels or job creation, performance, regulatory actions, litigation, earnings expectations, expected dividend payout ratios, and other statements that are other than statements of historical facts.

Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A “Risk Factors”, and Part II, Item 7 and Item 7A “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosure about Market Risk” in the company’s most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk”, and Part II, Item 1A, “Risk Factors”, in the company’s quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

About NW Natural

NW Natural is headquartered in Portland, Ore., and serves about 669,000 residential and business customers in Oregon and southwest Washington. It is the largest independent natural gas utility in the Pacific Northwest. The company has more than $2.4 billion in total assets, which includes about 16 Bcf of underground gas storage capacity within its service territory at Mist, Ore. NW Natural has increased its dividends paid on common stock for 54 consecutive years. The company is presently building a 20 Bcf underground gas storage facility near Fresno, Calif., and is working on a pipeline development project in Oregon.

# # #

Contacts at NW Natural:

Investor Contact: Bob Hess, 1-800-422-4012, ext. 2388, 503-220-2388 or 503-367-2616

Email: Bob.Hess@nwnatural.com

Or

Media Contact: Kim Heiting, 1-800-422-4012, ext. 5755 or 503-220-5755

Email: kah@nwnatural.com

5

NORTHWEST NATURAL GAS COMPANY

Comparative Income Statement

(Consolidated - Unaudited)

	Three Months Ended
(Thousands, except per share amounts)	06/30/10		06/30/09		Change			% Change
Gross Operating Revenues	$	162,365	$	149,060	$	13,305		9	%
Net Income	$	6,888	$	3,086	$	3,802		123	%
Diluted Average Shares of Common Stock Outstanding		26,641		26,607		34		—
Basic Earnings Per Share of Common Stock	$	0.26	$	0.12	$	0.14		117	%
Diluted Earnings Per Share of Common Stock	$	0.26	$	0.12	$	0.14		117	%
	Six Months Ended
(Thousands, except per share amounts)	06/30/10		06/30/09		Change			% Change
Gross Operating Revenues	$	448,894	$	586,415	$	(137,521	)	(23	%)
Net Income	$	50,496	$	50,449	$	47		—
Diluted Average Shares of Common Stock Outstanding		26,621		26,603		18		—
Basic Earnings Per Share of Common Stock	$	1.90	$	1.90	$	—		—
Diluted Earnings Per Share of Common Stock	$	1.90	$	1.90	$	—		—
	Twelve Months Ended
(Thousands, except per share amounts)	06/30/10		06/30/09		Change			% Change
Gross Operating Revenues	$	875,190	$	1,045,322	$	(170,132	)	(16	%)
Net Income	$	75,169	$	73,509	$	1,660		2	%
Diluted Average Shares of Common Stock Outstanding		26,594		26,582		12		—
Basic Earnings Per Share of Common Stock	$	2.83	$	2.78	$	0.05		2	%
Diluted Earnings Per Share of Common Stock	$	2.83	$	2.77	$	0.06		2	%

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NORTHWEST NATURAL GAS COMPANY
Consolidated Balance Sheets (unaudited)	June 30,			June 30,
Thousands	2010			2009
Assets:
Current assets:
Cash and cash equivalents	$	7,142		$	31,107
Restricted cash		929			15,822
Accounts receivable		42,781			26,779
Accrued unbilled revenue		16,419			18,122
Allowance for uncollectible accounts		(2,577	)		(3,520	)
Regulatory assets		56,804			89,179
Derivative assets		1,495			5,293
Inventories:
Gas		68,735			69,183
Materials and supplies		8,714			9,681
Other current assets		9,823			10,766
Total current assets		210,265			272,412
Non-current assets:
Property, plant and equipment		2,482,826			2,263,325
Less accumulated depreciation		710,732			679,977
Property, plant and equipment - net		1,772,094			1,583,348
Regulatory assets		329,197			270,044
Derivative assets		453			289
Other investments		68,393			62,315
Other non-current assets		15,159			16,103
Total non-current assets		2,185,296			1,932,099
Total assets	$	2,395,561		$	2,204,511
Capitalization and liabilities:
Capitalization:
Common stock	$	339,394		$	336,001
Retained earnings		357,173			325,506
Accumulated other comprehensive income (loss)		(5,772	)		(4,260	)
Total stockholders’ equity		690,795			657,247
Long-term debt		591,700			587,000
Total capitalization		1,282,495			1,244,247
Current liabilities:
Short-term debt		106,875			90,610
Current maturities of long-term debt		45,000			—
Accounts payable		81,675			50,055
Taxes accrued		13,008			10,807
Interest accrued		5,397			3,876
Regulatory liabilities		29,524			30,789
Derivative liabilities		34,463			70,052
Other current liabilities		31,900			33,343
Total current liabilities		347,842			289,532
Deferred credits and other liabilities:
Deferred tax liabilities		316,152			273,384
Regulatory liabilities		251,585			238,264
Pension and other postretirement benefit liabilities		120,185			116,844
Derivative liabilities		16,917			8,844
Other non-current liabilities		60,385			33,396
Total deferred credits and other liabilities		765,224			670,732
Total capitalization and liabilities	$	2,395,561		$	2,204,511

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NORTHWEST NATURAL GAS COMPANY
Consolidated Statements of Cash Flows (unaudited)	June 30,			June 30,
Thousands (six months ended)	2010			2009
Operating activities:
Net income	$	50,496		$	50,449
Adjustments to reconcile net income to cash provided by operations:
Depreciation and amortization		31,927			30,887
Undistributed earnings from equity investments		(728	)		(734	)
Non-cash expenses related to qualified defined benefit pension plans		4,131			4,848
Contributions to qualified defined benefit pension plans		(10,000	)		(25,000	)
Deferred environmental costs		(4,286	)		(5,227	)
Settlement of interest rate hedge		—			(10,096	)
Other		(1,264	)		(2,002	)
Changes in assets and liabilities:
Receivables		88,920			141,173
Inventories		3,508			17,203
Income taxes receivable		—			20,811
Accounts payable		(39,323	)		(44,177	)
Accrued interest		(38	)		1,091
Accrued taxes		(8,029	)		(1,648	)
Deferred gas savings - net		(18,336	)		15,616
Deferred tax liabilities		15,979			15,405
Other - net		(8,694	)		(8,786	)
Cash provided by operating activities		104,263			199,813
Investing activities:
Capital expenditures		(125,966	)		(54,428	)
Restricted cash		34,614			(10,803	)
Other		964			6,587
Cash used in investing activities		(90,388	)		(58,644	)
Financing activities:
Common stock issued - net		1,613			(720	)
Long-term debt issued		—			75,000
Change in short-term debt		4,875			(170,241	)
Cash dividend payments on common stock		(22,035	)		(20,937	)
Other		382			(80	)
Cash used in financing activities		(15,165	)		(116,978	)
Increase (decrease) in cash and cash equivalents		(1,290	)		24,191
Cash and cash equivalents - beginning of period		8,432			6,916
Cash and cash equivalents - end of period	$	7,142		$	31,107
Supplemental disclosure of cash flow information:
Interest paid	$	20,370		$	17,828
Income taxes paid	$	21,100		$	1,500

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NORTHWEST NATURAL GAS COMPANY

Financial Highlights

(Unaudited)

Second Quarter - 2010

	3 Months Ended June 30,								6 Months Ended June 30,								12 Months Ended June 30,
(Thousands, except per share amounts)	2010			2009			Change		2010			2009			Change		2010		2009			Change
Gross Operating Revenues	$	162,365		$	149,060		9	%	$	448,894		$	586,415		(23	%)	$	875,190	$	1,045,322		(16	%)
Cost of Sales		86,301			79,388		9	%		234,862			363,562		(35	%)		482,468		650,200		(26	%)
Revenue Taxes		3,871			3,753		3	%		10,913			14,295		(24	%)		21,274		25,344		(16	%)
Net Operating Revenues		72,193			65,919		10	%		203,119			208,558		(3	%)		371,448		369,778		—
Operating Expenses:
O&M		28,406			30,171		(6	%)		59,072			64,126		(8	%)		122,050		123,188		(1	%)
General Taxes		7,543			6,572		15	%		10,792			15,063		(28	%)		23,982		26,867		(11	%)
D&A		16,026			15,365		4	%		31,927			30,887		3	%		63,854		67,384		(5	%)
Total Operating Expenses		51,975			52,108		—			101,791			110,076		(8	%)		209,886		217,439		(3	%)
Income from Operations		20,218			13,811		46	%		101,328			98,482		3	%		161,562		152,339		6	%
Other Income and Expense - net		1,613			732		120	%		4,636			1,622		186	%		6,728		3,255		107	%
Interest Expense - net		10,617			10,006		6	%		21,106			19,376		9	%		42,367		38,592		10	%
Income Tax Expense		4,326			1,451		198	%		34,362			30,279		13	%		50,754		43,493		17	%
Net Income	$	6,888		$	3,086		123	%	$	50,496		$	50,449		—		$	75,169	$	73,509		2	%
Common Shares Outstanding:
Average for Period - basic		26,569			26,506					26,553			26,504					26,535		26,482
Average for Period - diluted		26,641			26,607					26,621			26,603					26,594		26,582
End of Period		26,576			26,513					26,576			26,513					26,576		26,513
Earnings per Share:
Basic	$	0.26		$	0.12		117	%	$	1.90		$	1.90		—		$	2.83	$	2.78		2	%
Diluted	$	0.26		$	0.12				$	1.90		$	1.90				$	2.83	$	2.77
Dividends Paid Per Share	$	0.415		$	0.395				$	0.830		$	0.790				$	1.64	$	1.56
Book Value Per Share - end of period	$	25.99		$	24.79				$	25.99		$	24.79				$	25.99	$	24.79
Market Closing Price - end of period	$	43.57		$	44.32				$	43.57		$	44.32				$	43.57	$	44.32
Balance Sheet Data - end of period:
Total Assets	$	2,395,561		$	2,204,511				$	2,395,561		$	2,204,511				$	2,395,561	$	2,204,511
Common Stock Equity	$	690,795		$	657,247				$	690,795		$	657,247				$	690,795	$	657,247
Long-Term Debt	$	636,700		$	587,000				$	636,700		$	587,000				$	636,700	$	587,000
(including amounts due in one year)
Operating Statistics:
Total Customers - end of period		669,405			662,475		1.0	%		669,405			662,475		1.0	%		669,405		662,475		1.0	%
Gas Deliveries (therms)
Res. & Comm. Customers		119,931			101,653					332,647			383,159					617,948		657,548
Industrial Firm		8,625			8,568					18,778			20,605					37,620		42,847
Industrial Interruptible		13,924			17,368					30,248			40,267					62,506		79,910
Transportation		90,907			81,606					185,117			176,474					359,576		389,063
Total		233,387			209,195					566,790			620,505					1,077,650		1,169,368
Gas Revenues
Res. & Comm. Customers	$	128,128		$	114,802				$	377,812		$	497,209				$	729,144	$	873,300
Industrial Firm		6,782			7,949					15,400			21,653					35,154		44,879
Industrial Interruptible		8,196			13,280					18,577			35,219					45,474		68,505
Transportation		3,363			3,481					6,718			6,805					13,548		13,833
Regulatory adjustment for income taxes		1,034			(626	)				4,018			2,887					7,015		4,265
Other Revenues		9,599			4,290					15,640			12,203					24,603		21,865
Total	$	157,102		$	143,176				$	438,165		$	575,976				$	854,938	$	1,026,647
Cost of Gas Sold - Utility	$	86,292		$	79,359				$	234,840		$	363,523				$	482,405	$	650,111
Revenue Taxes	$	3,871		$	3,753				$	10,913		$	14,295				$	21,274	$	25,344
Net Operating Revenues (Utility Margin)	$	66,939		$	60,064				$	192,412		$	198,158				$	351,259	$	351,192
Degree Days
Average (25-year average)		683			683					2,549			2,549					4,265		4,265
Actual		857			577					2,484			2,598					4,269		4,334
Colder (warmer) than Average		25	%		(16	%)				(3	%)		2	%				—		2	%

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